UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)


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

For the quarterly period ended October ~~02, 2021~~01, 2022


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

For the transition period from to

Commission file number 1-4171

KELLOGG COMPANY

State of Incorporation—

Delaware

IRS Employer Identification No.

38-0710690

One Kellogg Square, P.O. Box 3599, Battle Creek, MI 49016-3599

Registrant’s telephone number: 269-961-2000

Securities registered pursuant to Section 12(b) of the Act:


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
0.800% Senior Notes due 2022	K 22A	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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Common Stock outstanding as of October ~~2, 2021~~1, 2022 — ~~341,122,803~~341,281,145 shares

Table of Contents

KELLOGG COMPANY

INDEX


						Page
			PART I — Financial Information
			Item 1:
			Financial Statements
			Consolidated Balance Sheet — October ~~2, 2021~~1, 2022 and January ~~2, 2021~~1, 2022			3
			Consolidated Statement of Income — quarter and year-to-date periods ended October 1, 2022 and October 2, 2021 ~~and September 26, 2020~~			4
			Consolidated Statement of Comprehensive Income – quarter and year-to-date periods ended October 1, 2022 and October 2, 2021 ~~and September 26, 2020~~			5
			Consolidated Statement of Equity — quarter and year-to-date periods ended October 1, 2022 and October 2, 2021			6
			~~Consolidated Statement of Equity — quarter and year-to-date periods ended September 26, 2020~~			7
			Consolidated Statement of Cash Flows — year-to-date periods ended October 1, 2022 and October 2, 2021 ~~and September 26, 2020~~			8
			Notes to Consolidated Financial Statements			9
			Item 2:
			Management’s Discussion and Analysis of Financial Condition and Results of Operations			2423
			Item 3:
			Quantitative and Qualitative Disclosures about Market Risk			4140
			Item 4:
			Controls and Procedures			4241
			PART II — Other Information
			Item 1A:
			Risk Factors			4342
			Item 2:
			Unregistered Sales of Equity Securities and Use of Proceeds			43
			Item 6:
			Exhibits			44
			Signatures			45
			Exhibit Index			46

Table of Contents

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Kellogg Company and Subsidiaries

CONSOLIDATED BALANCE SHEET

(millions, except per share data)


		October 2, 2021 (unaudited)		January 2, 2021			October 1, 2022 (unaudited)		January 1, 2022
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	440	$	435	Cash and cash equivalents	$	373	$	286
Accounts receivable, net	Accounts receivable, net	1,680		1,537		Accounts receivable, net	1,985		1,489
Inventories	Inventories	1,378		1,284		Inventories	1,682		1,398
Other current assets	Other current assets	301		226		Other current assets	404		221
Total current assets	Total current assets	3,799		3,482		Total current assets	4,444		3,394
Property, net	Property, net	3,753		3,713		Property, net	3,564		3,827
Operating lease right-of-use assets	Operating lease right-of-use assets	651		658		Operating lease right-of-use assets	608		640
Goodwill	Goodwill	5,794		5,799		Goodwill	5,691		5,771
Other intangibles, net	Other intangibles, net	2,441		2,491		Other intangibles, net	2,302		2,409
Investments in unconsolidated entities	Investments in unconsolidated entities	423		391		Investments in unconsolidated entities	427		424
Other assets	Other assets	1,546		1,462		Other assets	1,980		1,713
Total assets	Total assets	$	18,407	$	17,996	Total assets	$	19,016	$	18,178
Current liabilities	Current liabilities					Current liabilities
Current maturities of long-term debt	Current maturities of long-term debt	$	16	$	627	Current maturities of long-term debt	$	816	$	712
Notes payable	Notes payable	497		102		Notes payable	174		137
Accounts payable	Accounts payable	2,526		2,471		Accounts payable	2,871		2,573
Current operating lease liabilities	Current operating lease liabilities	128		117		Current operating lease liabilities	111		116
Accrued advertising and promotion	Accrued advertising and promotion	834		776		Accrued advertising and promotion	813		714
Accrued salaries and wages	Accrued salaries and wages	283		378		Accrued salaries and wages	317		300
Other current liabilities	Other current liabilities	745		767		Other current liabilities	931		763
Total current liabilities	Total current liabilities	5,029		5,238		Total current liabilities	6,033		5,315
Long-term debt	Long-term debt	7,020		6,746		Long-term debt	5,697		6,262
Operating lease liabilities	Operating lease liabilities	503		520		Operating lease liabilities	478		502
Deferred income taxes	Deferred income taxes	613		562		Deferred income taxes	923		722
Pension liability	Pension liability	738		769		Pension liability	603		706
Other liabilities	Other liabilities	495		525		Other liabilities	544		456
Commitments and contingencies	Commitments and contingencies	0				Commitments and contingencies
Equity	Equity					Equity
Common stock, $.25 par value	Common stock, $.25 par value	105		105		Common stock, $.25 par value	105		105
Capital in excess of par value	Capital in excess of par value	1,005		972		Capital in excess of par value	1,027		1,023
Retained earnings	Retained earnings	8,796		8,326		Retained earnings	9,499		9,028
Treasury stock, at cost	Treasury stock, at cost	(4,729)		(4,559)		Treasury stock, at cost	(4,750)		(4,715)
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(1,693)		(1,732)		Accumulated other comprehensive income (loss)	(1,598)		(1,721)
Total Kellogg Company equity	Total Kellogg Company equity	3,484		3,112		Total Kellogg Company equity	4,283		3,720
Noncontrolling interests	Noncontrolling interests	525		524		Noncontrolling interests	455		495
Total equity	Total equity	4,009		3,636		Total equity	4,738		4,215
Total liabilities and equity	Total liabilities and equity	$	18,407	$	17,996	Total liabilities and equity	$	19,016	$	18,178

See accompanying Notes to Consolidated Financial Statements.

Table of Contents

Kellogg Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

(millions, except per share data)


		Quarter ended				Year-to-date period ended					Quarter ended				Year-to-date period ended
(unaudited)	(unaudited)	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020		(unaudited)	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Net sales	Net sales	$	3,622	$	3,429	$	10,761	$	10,306	Net sales	$	3,946	$	3,622	$	11,482	$	10,761
Cost of goods sold	Cost of goods sold	2,457		2,228		7,206		6,764		Cost of goods sold	2,793		2,457		8,027		7,206
Selling, general and administrative expense	Selling, general and administrative expense	718		790		2,132		2,166		Selling, general and administrative expense	785		718		2,155		2,132
Operating profit	Operating profit	447		411		1,423		1,376		Operating profit	368		447		1,300		1,423
Interest expense	Interest expense	55		63		172		196		Interest expense	39		55		149		172
Other income (expense), net	Other income (expense), net	—		70		155		151		Other income (expense), net	54		—		188		155
Income before income taxes	Income before income taxes	392		418		1,406		1,331		Income before income taxes	383		392		1,339		1,406
Income taxes	Income taxes	92		65		345		268		Income taxes	74		92		283		345
Earnings (loss) from unconsolidated entities	Earnings (loss) from unconsolidated entities	5		(1)		—		(7)		Earnings (loss) from unconsolidated entities	3		5		6		—
Net income	Net income	305		352		1,061		1,056		Net income	312		305		1,062		1,061
Net income (loss) attributable to noncontrolling interests	Net income (loss) attributable to noncontrolling interests	(2)		4		6		10		Net income (loss) attributable to noncontrolling interests	2		(2)		4		6
Net income attributable to Kellogg Company	Net income attributable to Kellogg Company	$	307	$	348	$	1,055	$	1,046	Net income attributable to Kellogg Company	$	310	$	307	$	1,058	$	1,055
Per share amounts:	Per share amounts:									Per share amounts:
Basic earnings	Basic earnings	$	0.90	$	1.02	$	3.09	$	3.05	Basic earnings	$	0.91	$	0.90	$	3.11	$	3.09
Diluted earnings	Diluted earnings	$	0.89	$	1.01	$	3.07	$	3.03	Diluted earnings	$	0.90	$	0.89	$	3.09	$	3.07

Average shares outstanding:	Average shares outstanding:									Average shares outstanding:
Basic	Basic	341		343		341		343		Basic	341		341		340		341
Diluted	Diluted	343		346		343		345		Diluted	344		343		343		343
Actual shares outstanding at period end	Actual shares outstanding at period end					341		344		Actual shares outstanding at period end					341		341

See accompanying Notes to Consolidated Financial Statements.

Table of Contents

Kellogg Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(millions)


		Quarter ended						Year-to-date period ended							Quarter ended						Year-to-date period ended
		October 2, 2021						October 2, 2021							October 1, 2022						October 1, 2022
(unaudited)	(unaudited)	Pre-tax amount		Tax (expense) benefit		After-tax amount		Pre-tax amount		Tax (expense) benefit		After-tax amount		(unaudited)	Pre-tax amount		Tax (expense) benefit		After-tax amount		Pre-tax amount		Tax (expense) benefit		After-tax amount
Net income	Net income					$	305					$	1,061	Net income					$	312					$	1,062
Other comprehensive income (loss):	Other comprehensive income (loss):													Other comprehensive income (loss):
Foreign currency translation adjustments:	Foreign currency translation adjustments:													Foreign currency translation adjustments:
Foreign currency translation adjustments during period	Foreign currency translation adjustments during period	$	(16)	$	(21)	(37)		$	25	$	(44)	(19)		Foreign currency translation adjustments during period	$	(249)	$	4	(245)		$	(509)	$	6	(503)
Net investment hedges:														Net investment hedges:
Net investment hedges gain (loss)														Net investment hedges gain (loss)	260		(68)		192		616		(162)		454
Cash flow hedges:	Cash flow hedges:													Cash flow hedges:
Unrealized gain (loss)	Unrealized gain (loss)	3		(1)		2		42		(11)		31		Unrealized gain (loss)	62		(16)		46		213		(56)		157
Reclassification to net income	Reclassification to net income	4		(1)		3		19		(5)		14		Reclassification to net income	(14)		3		(11)		(6)		1		(5)
Postretirement and postemployment benefits:	Postretirement and postemployment benefits:													Postretirement and postemployment benefits:

Reclassification to net income:	Reclassification to net income:													Reclassification to net income:
Net experience (gain) loss	Net experience (gain) loss	—		—		—		(2)		1		(1)		Net experience (gain) loss	—		—		—		(2)		1		(1)

Available-for-sale securities:	Available-for-sale securities:													Available-for-sale securities:
Unrealized gain (loss)	Unrealized gain (loss)	—		—		—		(1)		—		(1)		Unrealized gain (loss)	(2)		—		(2)		(6)		—		(6)
Reclassification to net income	Reclassification to net income	(2)		—		(2)		(2)		—		(2)		Reclassification to net income	1		—		1		1		—		1
Other comprehensive income (loss)	Other comprehensive income (loss)	$	(11)	$	(23)	$	(34)	$	81	$	(59)	$	22	Other comprehensive income (loss)	$	58	$	(77)	$	(19)	$	307	$	(210)	$	97
Comprehensive income	Comprehensive income					$	271					$	1,083	Comprehensive income					$	293					$	1,159
Net Income attributable to noncontrolling interests	Net Income attributable to noncontrolling interests					(2)						6		Net Income attributable to noncontrolling interests					2						4
Other comprehensive income (loss) attributable to noncontrolling interests	Other comprehensive income (loss) attributable to noncontrolling interests					(4)						(17)		Other comprehensive income (loss) attributable to noncontrolling interests					(22)						(26)
Comprehensive income attributable to Kellogg Company	Comprehensive income attributable to Kellogg Company					$	277					$	1,094	Comprehensive income attributable to Kellogg Company					$	313					$	1,181

		Quarter ended						Year-to-date period ended							Quarter ended						Year-to-date period ended
		September 26, 2020						September 26, 2020							October 2, 2021						October 2, 2021
(unaudited)	(unaudited)	Pre-tax amount		Tax (expense) benefit		After-tax amount		Pre-tax amount		Tax (expense) benefit		After-tax amount		(unaudited)	Pre-tax amount		Tax (expense) benefit		After-tax amount		Pre-tax amount		Tax (expense) benefit		After-tax amount
Net income	Net income					$	352					$	1,056	Net income					$	305					$	1,061
Other comprehensive income (loss):	Other comprehensive income (loss):													Other comprehensive income (loss):
Foreign currency translation adjustments:	Foreign currency translation adjustments:													Foreign currency translation adjustments:
Foreign currency translation adjustments during period	Foreign currency translation adjustments during period	$	(91)	$	39	(52)		$	(352)	$	29	(323)		Foreign currency translation adjustments during period	$	(103)	$	2	(101)		$	(150)	$	2	(148)
Net investment hedges:														Net investment hedges:
Net investment hedges gain (loss)														Net investment hedges gain (loss)	87		(23)		64		175		(46)		129
Cash flow hedges:	Cash flow hedges:													Cash flow hedges:
Unrealized gain (loss) on cash flow hedges	Unrealized gain (loss) on cash flow hedges	15		(4)		11		(38)		10		(28)		Unrealized gain (loss) on cash flow hedges	3		(1)		2		42		(11)		31
Reclassification to net income	Reclassification to net income	4		(1)		3		11		(3)		8		Reclassification to net income	4		(1)		3		19		(5)		14
Postretirement and postemployment benefits:	Postretirement and postemployment benefits:													Postretirement and postemployment benefits:

Reclassification to net income:	Reclassification to net income:													Reclassification to net income:
Net experience (gain) loss	Net experience (gain) loss	—		—		—		(2)		1		(1)		Net experience (gain) loss	—		—		—		(2)		1		(1)
Prior service cost		—		—		—		(1)		—		(1)

Available-for-sale securities:	Available-for-sale securities:													Available-for-sale securities:
Unrealized gain (loss)	Unrealized gain (loss)	—		—		—		2		—		2		Unrealized gain (loss)	—		—		—		(1)		—		(1)

Reclassification to net income														Reclassification to net income	(2)		—		(2)		(2)		—		(2)
Other comprehensive income (loss)	Other comprehensive income (loss)	$	(72)	$	34	$	(38)	$	(380)	$	37	$	(343)	Other comprehensive income (loss)	$	(11)	$	(23)	$	(34)	$	81	$	(59)	$	22
Comprehensive income	Comprehensive income					$	314					$	713	Comprehensive income					$	271					$	1,083
Net Income attributable to noncontrolling interests	Net Income attributable to noncontrolling interests					4						10		Net Income attributable to noncontrolling interests					(2)						6
Other comprehensive income (loss) attributable to noncontrolling interests	Other comprehensive income (loss) attributable to noncontrolling interests					2						(34)		Other comprehensive income (loss) attributable to noncontrolling interests					(4)						(17)
Comprehensive income attributable to Kellogg Company	Comprehensive income attributable to Kellogg Company					$	308					$	737	Comprehensive income attributable to Kellogg Company					$	277					$	1,094

See accompanying Notes to Consolidated Financial Statements.

Table of Contents

Kellogg Company and Subsidiaries

CONSOLIDATED STATEMENT OF EQUITY

(millions)


		Quarter ended October 2, 2021																			Quarter ended October 1, 2022
		Common stock			Capital in excess of par value		Retained earnings		Treasury stock			Accumulated other comprehensive income (loss)		Total Kellogg Company equity		Non-controlling interests		Total equity			Common stock			Capital in excess of par value		Retained earnings		Treasury stock			Accumulated other comprehensive income (loss)		Total Kellogg Company equity		Non-controlling interests		Total equity
(unaudited)	(unaudited)	shares	amount						shares	amount										(unaudited)	shares	amount						shares	amount
Balance, July 3, 2021		421	$	105	$	973	$	8,688	80	$	(4,741)	$	(1,663)	$	3,362	$	518	$	3,880
Balance, July 2, 2022																				Balance, July 2, 2022	421	$	105	$	1,008	$	9,387	81	$	(4,817)	$	(1,601)	$	4,082	$	476	$	4,558

Net income	Net income						307							307		(2)		305		Net income						310							310		2		312
Acquisition of noncontrolling interest and other					22									22		30		52

Dividends declared ($0.58 per share)							(198)							(198)				(198)

Dividends declared ($0.59 per share)																				Dividends declared ($0.59 per share)						(202)							(202)				(202)
Distributions to noncontrolling interest	Distributions to noncontrolling interest													—		(17)		(17)		Distributions to noncontrolling interest													—		(1)		(1)
Other comprehensive income	Other comprehensive income											(30)		(30)		(4)		(34)		Other comprehensive income											3		3		(22)		(19)

Stock compensation	Stock compensation				11									11				11		Stock compensation				21									21				21
Stock options exercised and other	Stock options exercised and other				(1)		(1)		—	12				10				10		Stock options exercised and other				(2)		4		(1)	67				69				69
Balance, October 2, 2021		421	$	105	$	1,005	$	8,796	80	$	(4,729)	$	(1,693)	$	3,484	$	525	$	4,009
Balance, October 1, 2022																				Balance, October 1, 2022	421	$	105	$	1,027	$	9,499	80	$	(4,750)	$	(1,598)	$	4,283	$	455	$	4,738


		Year-to-date period ended October 2, 2021																			Year-to-date period ended October 1, 2022
		Common stock			Capital in excess of par value		Retained earnings		Treasury stock			Accumulated other comprehensive income (loss)		Total Kellogg Company equity		Non-controlling interests		Total equity			Common stock			Capital in excess of par value		Retained earnings		Treasury stock			Accumulated other comprehensive income (loss)		Total Kellogg Company equity		Non-controlling interests		Total equity
(unaudited)	(unaudited)	shares	amount						shares	amount										(unaudited)	shares	amount						shares	amount
Balance, January 2, 2021		421	$	105	$	972	$	8,326	77	$	(4,559)	$	(1,732)	$	3,112	$	524	$	3,636
Balance, January 1, 2022																				Balance, January 1, 2022	421	$	105	$	1,023	$	9,028	80	$	(4,715)	$	(1,721)	$	3,720	$	495	$	4,215
Common stock repurchases	Common stock repurchases								4	(240)				(240)				(240)		Common stock repurchases								5	(300)				(300)				(300)
Net income	Net income						1,055							1,055		6		1,061		Net income						1,058							1,058		4		1,062
Acquisition of noncontrolling interest and other					22									22		30		52

Dividends declared ($1.73 per share)							(590)							(590)				(590)

Dividends declared ($1.75 per share)																				Dividends declared ($1.75 per share)						(596)							(596)				(596)
Distributions to noncontrolling interest	Distributions to noncontrolling interest													—		(18)		(18)		Distributions to noncontrolling interest													—		(18)		(18)
Other comprehensive income	Other comprehensive income											39		39		(17)		22		Other comprehensive income											123		123		(26)		97

Stock compensation	Stock compensation				50									50				50		Stock compensation				56									56				56
Stock options exercised and other	Stock options exercised and other				(39)		5		(1)	70				36				36		Stock options exercised and other				(52)		9		(5)	265				222				222
Balance, October 2, 2021		421	$	105	$	1,005	$	8,796	80	$	(4,729)	$	(1,693)	$	3,484	$	525	$	4,009
Balance, October 1, 2022																				Balance, October 1, 2022	421	$	105	$	1,027	$	9,499	80	$	(4,750)	$	(1,598)	$	4,283	$	455	$	4,738

See accompanying Notes to Consolidated Financial Statements.

Table of Contents

Kellogg Company and Subsidiaries

CONSOLIDATED STATEMENT OF EQUITY (cont.)

(millions)


		Quarter ended September 26, 2020																			Quarter ended October 2, 2021
		Common stock			Capital in excess of par value		Retained earnings		Treasury stock			Accumulated other comprehensive income (loss)		Total Kellogg Company equity		Non-controlling interests		Total equity			Common stock			Capital in excess of par value		Retained earnings		Treasury stock			Accumulated other comprehensive income (loss)		Total Kellogg Company equity		Non-controlling interests		Total equity
(unaudited)	(unaudited)	shares	amount						shares	amount										(unaudited)	shares	amount						shares	amount
Balance, June 27, 2020		421	$	105	$	929	$	8,166	78	$	(4,613)	$	(1,717)	$	2,870	$	536	$	3,406
Balance, July 3, 2021																				Balance, July 3, 2021	421	$	105	$	973	$	8,688	80	$	(4,741)	$	(1,663)	$	3,362	$	518	$	3,880

Net income	Net income						348							348		4		352		Net income						307							307		(2)		305

Dividends declared ($0.57 per share)							(196)							(196)				(196)

Acquisition of noncontrolling interest and other																				Acquisition of noncontrolling interest and other				22									22		30		52
Dividends declared ($0.58 per share)																				Dividends declared ($0.58 per share)						(198)							(198)				(198)
Distributions to noncontrolling interest																				Distributions to noncontrolling interest													—		(17)		(17)
Other comprehensive income	Other comprehensive income											(40)		(40)		2		(38)		Other comprehensive income											(30)		(30)		(4)		(34)

Stock compensation	Stock compensation				18									18				18		Stock compensation				11									11				11
Stock options exercised and other	Stock options exercised and other				1		—		(1)	43				44				44		Stock options exercised and other				(1)		(1)		—	12				10				10
Balance, September 26, 2020		421	$	105	$	948	$	8,318	77	$	(4,570)	$	(1,757)	$	3,044	$	542	$	3,586
Balance, October 2, 2021																				Balance, October 2, 2021	421	$	105	$	1,005	$	8,796	80	$	(4,729)	$	(1,693)	$	3,484	$	525	$	4,009


		Year-to-date period ended September 26, 2020																			Year-to-date period ended October 2, 2021
		Common stock			Capital in excess of par value		Retained earnings		Treasury stock			Accumulated other comprehensive income (loss)		Total Kellogg Company equity		Non-controlling interests		Total equity			Common stock			Capital in excess of par value		Retained earnings		Treasury stock			Accumulated other comprehensive income (loss)		Total Kellogg Company equity		Non-controlling interests		Total equity
(unaudited)	(unaudited)	shares	amount						shares	amount										(unaudited)	shares	amount						shares	amount
Balance, December 28, 2019		421	$	105	$	921	$	7,859	79	$	(4,690)	$	(1,448)	$	2,747	$	567	$	3,314

Balance, January 2, 2021																				Balance, January 2, 2021	421	$	105	$	972	$	8,326	77	$	(4,559)	$	(1,732)	$	3,112	$	524	$	3,636
Common stock repurchases																				Common stock repurchases								4	(240)				(240)				(240)
Net income	Net income						1,046							1,046		10		1,056		Net income						1,055							1,055		6		1,061

Dividends declared ($1.71 per share)							(586)							(586)				(586)
Acquisition of noncontrolling interest and other																				Acquisition of noncontrolling interest and other				22									22		30		52
Dividends declared ($1.73 per share)																				Dividends declared ($1.73 per share)						(590)							(590)				(590)
Distributions to noncontrolling interest	Distributions to noncontrolling interest													—		(1)		(1)		Distributions to noncontrolling interest													—		(18)		(18)
Other comprehensive income	Other comprehensive income											(309)		(309)		(34)		(343)		Other comprehensive income											39		39		(17)		22

Stock compensation	Stock compensation				55									55				55		Stock compensation				50									50				50
Stock options exercised and other	Stock options exercised and other				(28)		(1)		(2)	120				91				91		Stock options exercised and other				(39)		5		(1)	70				36				36
Balance, September 26, 2020		421	$	105	$	948	$	8,318	77	$	(4,570)	$	(1,757)	$	3,044	$	542	$	3,586
Balance, October 2, 2021																				Balance, October 2, 2021	421	$	105	$	1,005	$	8,796	80	$	(4,729)	$	(1,693)	$	3,484	$	525	$	4,009

See accompanying Notes to Consolidated Financial Statements.

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Kellogg Company and Subsidiaries

CONSOLIDATED STATEMENT OF CASH FLOWS

(millions)


		Year-to-date period ended					Year-to-date period ended
(unaudited)	(unaudited)	October 2, 2021		September 26, 2020		(unaudited)	October 1, 2022		October 2, 2021
Operating activities	Operating activities					Operating activities
Net income	Net income	$	1,061	$	1,056	Net income	$	1,062	$	1,061
Adjustments to reconcile net income to operating cash flows:	Adjustments to reconcile net income to operating cash flows:					Adjustments to reconcile net income to operating cash flows:
Depreciation and amortization	Depreciation and amortization	346		355		Depreciation and amortization	351		346
Postretirement benefit plan expense (benefit)	Postretirement benefit plan expense (benefit)	(112)		(113)		Postretirement benefit plan expense (benefit)	(189)		(112)
Deferred income taxes	Deferred income taxes	4		57		Deferred income taxes	26		4
Stock compensation	Stock compensation	50		55		Stock compensation	56		50
Multi-employer pension plan exit liability		—		(5)

Other	Other	(29)		(34)		Other	(16)		(29)
Postretirement benefit plan contributions	Postretirement benefit plan contributions	(15)		(19)		Postretirement benefit plan contributions	(17)		(15)
Changes in operating assets and liabilities, net of acquisitions:	Changes in operating assets and liabilities, net of acquisitions:					Changes in operating assets and liabilities, net of acquisitions:
Trade receivables	Trade receivables	(196)		(113)		Trade receivables	(526)		(196)
Inventories	Inventories	(103)		(57)		Inventories	(343)		(103)
Accounts payable	Accounts payable	198		108		Accounts payable	501		198
All other current assets and liabilities	All other current assets and liabilities	(59)		303		All other current assets and liabilities	275		(59)
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	1,145		1,593		Net cash provided by (used in) operating activities	1,180		1,145
Investing activities	Investing activities					Investing activities
Additions to properties	Additions to properties	(408)		(326)		Additions to properties	(350)		(408)
Issuance of notes receivable	Issuance of notes receivable	(29)		(19)		Issuance of notes receivable	—		(29)
Repayments from notes receivable	Repayments from notes receivable	28		6		Repayments from notes receivable	10		28
Purchase of marketable securities		—		(250)

Investments in unconsolidated entities	Investments in unconsolidated entities	(10)		—		Investments in unconsolidated entities	—		(10)

Purchases of available for sale securities	Purchases of available for sale securities	(56)		(75)		Purchases of available for sale securities	(15)		(56)
Sales of available for sale securities	Sales of available for sale securities	69		13		Sales of available for sale securities	14		69
Settlement of net investment hedges						Settlement of net investment hedges	37		10
Collateral paid on derivatives						Collateral paid on derivatives	(10)		(9)
Other	Other	21		2		Other	2		20
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(385)		(649)		Net cash provided by (used in) investing activities	(312)		(385)
Financing activities	Financing activities					Financing activities
Net issuances (reductions) of notes payable	Net issuances (reductions) of notes payable	343		9		Net issuances (reductions) of notes payable	37		343
Issuances of long-term debt	Issuances of long-term debt	361		554		Issuances of long-term debt	—		361
Reductions of long-term debt	Reductions of long-term debt	(646)		(45)		Reductions of long-term debt	(33)		(646)

Net issuances of common stock	Net issuances of common stock	50		105		Net issuances of common stock	244		50
Common stock repurchases	Common stock repurchases	(240)		—		Common stock repurchases	(300)		(240)
Cash dividends	Cash dividends	(590)		(586)		Cash dividends	(596)		(590)

Other	Other	(18)		(16)		Other	(17)		(18)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(740)		21		Net cash provided by (used in) financing activities	(665)		(740)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(15)		(33)		Effect of exchange rate changes on cash and cash equivalents	(116)		(15)
Increase (decrease) in cash and cash equivalents	Increase (decrease) in cash and cash equivalents	5		932		Increase (decrease) in cash and cash equivalents	87		5
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	435		397		Cash and cash equivalents at beginning of period	286		435
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	440	$	1,329	Cash and cash equivalents at end of period	$	373	$	440

Supplemental cash flow disclosures of non-cash investing activities:	Supplemental cash flow disclosures of non-cash investing activities:					Supplemental cash flow disclosures of non-cash investing activities:
Additions to properties included in accounts payable	Additions to properties included in accounts payable	$	91	$	108	Additions to properties included in accounts payable	$	75	$	91

See accompanying Notes to Consolidated Financial Statements.

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Notes to Consolidated Financial Statements

for the quarter ended October ~~2, 2021~~1, 2022 (unaudited)

Note 1 Accounting policies

Basis of presentation

The unaudited interim financial information of Kellogg Company (the Company) included in this report reflects all adjustments, all of which are of a normal and recurring nature, that management believes are necessary for a fair statement of the results of operations, comprehensive income, financial position, equity and cash flows for the periods presented. This interim information should be read in conjunction with the financial statements and accompanying footnotes within the Company’s ~~2020~~2021 Annual Report on Form 10-K.

The condensed balance sheet information at January ~~2, 2021~~1, 2022 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. The results of operations for the quarter ended October ~~2, 2021~~1, 2022 are not necessarily indicative of the results to be expected for other interim periods or the full year.

Accounts payable - Supplier Finance Programs

The Company has agreements with third parties to provide accounts payable tracking systems which facilitate participating suppliers’ ability to monitor and, if elected, sell payment obligations from the Company to designated third-party financial institutions. Participating suppliers may, at their sole discretion, make offers to sell one or more payment obligations of the Company prior to their scheduled due dates at a discounted price to participating financial institutions. The Company’s goal is to capture overall supplier savings, in the form of payment terms or vendor funding, and the agreements facilitate the suppliers’ ability to sell payment obligations, while providing them with greater working capital flexibility. The Company has no economic interest in the sale of these suppliers’ receivables and no direct financial relationship with the financial institutions concerning these services. The Company’s obligations to its suppliers, including amounts due and scheduled payment dates, are not impacted by suppliers’ decisions to sell amounts under the arrangements. However, the Company’s right to offset balances due from suppliers against payment obligations is restricted by the agreements for those payment obligations that have been sold by suppliers. The payment of these obligations by the Company is included in cash used in operating activities in the Consolidated Statement of Cash Flows. As of October ~~2, 2021, $914~~1, 2022, $1.1 billion of the Company’s outstanding payment obligations had been placed in the accounts payable tracking system. As of January 1, 2022, $905 million of the Company’s outstanding payment obligations had been placed in the accounts payable tracking ~~system, and participating suppliers had sold $650 million~~system.

Accounting standards to be adopted in future periods

Supplier Finance Programs: Disclosure of ~~those payment obligations~~Supplier Finance Program Obligations. In September 2022, the FASB issued an ASU to ~~participating financial institutions. As~~improve the disclosures of ~~January 2, 2021, $909 million~~supplier finance programs. Specifically, the ASU requires disclosure of key terms of the ~~Company’s~~supplier finance programs and a rollforward of the related obligations. The amendments in this ASU do not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance programs. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company has historically presented information regarding the nature and amount of outstanding ~~payment~~Accounts Payable obligations ~~had been placed in~~confirmed into supplier finance programs within the ~~accounts payable tracking system,~~Accounting Policies note of the financial statements. The Company is currently assessing the impact of any incremental disclosures required by this ASU and ~~participating suppliers had sold $670 million~~the planned timing of ~~those payment obligations to participating financial institutions.~~adoption.

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Note 2 Proposed separation transactions

On June 21, 2022, the Company announced its intent to separate its North American cereal and plant-based foods businesses, via tax-free spin-offs, with a target to complete the transactions by the end of 2023, resulting in three independent public companies, each better positioned to unlock their full standalone potential. While we announced a plan to separate our plant-based food business through a tax free spin-off, we are also exploring other strategic alternatives, including a possible sale. We cannot assure that the transactions will be completed on the anticipated timeline or at all or that the terms of the separations will not change. The transactions will follow the satisfaction of customary conditions, including reviews and final approval by Kellogg’s Board of Directors, receipt of an Internal Revenue Service ruling and relevant tax opinions with respect to the tax-free nature of the transactions, effectiveness of appropriate filings with the U.S. Securities and Exchange Commission, and the completion of audited financials of the new independent companies.

The Company incurred charges related to the proposed separations of $18 million and $22 million for the quarter and year-to-date periods ended October 1, 2022, respectively, primarily related to legal and consulting costs.

Note 23 Sale of accounts receivable

The Company has a program in which a discrete group of customers are allowed to extend their payment terms in exchange for the elimination of early payment discounts (Extended Terms Program).

The Company has two Receivable Sales Agreements (Monetization Programs) described below, which are intended to directly offset the impact 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. The Monetization Programs sell, on a revolving basis, certain trade accounts receivable invoices to third party financial institutions. Transfers under these agreements are accounted for as sales of receivables resulting in the receivables being de-recognized from the Consolidated Balance Sheet. The 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 approximately $745 million. During 2022 the Company amended the agreements to decrease the previous maximum receivables sold limit from approximately $1.1 ~~billion.~~billion as of January 1, 2022.

The Company has no retained interest in the receivables sold, however the Company does have collection and administrative responsibilities for the sold receivables. The Company has not recorded any servicing assets or liabilities as of October ~~2, 2021~~1, 2022 and January ~~2, 2021~~1, 2022 for these agreements as the fair value of these servicing arrangements as well as the fees earned were not material to the financial statements.

~~Table of Contents~~

Accounts receivable sold of ~~$611~~$632 million and ~~$783~~$549 million remained outstanding under these arrangements as of October ~~2, 2021~~1, 2022 and January ~~2, 2021,~~1, 2022, 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 $6 million and $11 million for the quarter and year-to-date period ended October 1, 2022, respectively and was $2 million and $6 million for the quarter and year-to-date ~~periods~~period ended October 2, ~~2021, respectively and was $3 million and $11 million for the quarter and year-to-date periods ended September 26, 2020, respectively.~~2021. The recorded loss is included in Other income and expense, net (OIE).

Other programs

Additionally, from time to time certain of the Company's foreign subsidiaries will transfer, without recourse, accounts receivable 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. Accounts receivable sold of ~~$18~~$36 million and ~~$55~~$66 million remained outstanding under these programs as of October ~~2, 2021~~1, 2022 and January ~~2, 2021,~~1, 2022, 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 OIE and is not material.

~~Note 3 Restructuring programs~~

The Company views its restructuring programs as part of its operating principles to provide greater visibility in achieving its long-term profit growth targets. Initiatives undertaken are currently expected to recover cash implementation costs within a 3 to 5-year period subsequent to 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.10

~~During the third quarter~~

Table of 2021, the Company announced a reconfiguration of the North America reportable segment supply chain network, designed to drive increased productivity. The project is expected to be substantially completed by early 2024, with related productivity improvements commencing in 2023. The overall project is expected to result in cumulative pretax charges of approximately $45 million, which include employee-related costs of $4 million, other cash costs of $21 million and non-cash costs, primarily consisting of accelerated depreciation and asset write-off's, of $20 million. Charges incurred related to this restructuring program were $4 million during the quarter and year-to-date periods ended October 2, 2021. These charges primarily related to severance costs, and were recorded in COGS expense.Contents

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

Note 4 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 certain contingently issuable performance shares. There were approximately 2 million and 4 million anti-dilutive potential common shares excluded from the calculation for the quarter and year-to-date periods ended October 1, 2022. There were approximately 8 million and 11 million anti-dilutive potential common shares excluded from the calculation for the quarter and year-to-date periods ended October 2, 2021. ~~There were 7 million anti-dilutive potential common shares excluded from the calculation for the quarter and year-to-date periods ended September 26, 2020.~~ Please refer to the Consolidated Statement of Income for basic and diluted earnings per share for the quarter and year-to-date periods ended October 1, 2022 and October 2, ~~2021 and September 26, 2020.~~2021.

Share repurchases

In February 2020, the board of directors approved ~~a new~~an authorization to repurchase up to $1.5 billion of our common stock through December 2022. During the ~~quarter~~year-to-date period ended October ~~2, 2021,~~1, 2022, the Company ~~did not repurchase any~~repurchased approximately 5 million shares of common ~~stock. During~~stock for a total of $300 million. During the year-to-date period ~~ended~~ October 2, 2021, the Company repurchased approximately 4 million shares of common stock for a total of $240 million. ~~During the quarter and year-to-date periods ended September 26, 2020, the Company did not repurchase any shares of common stock.~~

~~Table of Contents~~

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, adjustments for net experience losses and prior service cost related to employee benefit plans, and adjustments for unrealized gains and losses on available-for-sale securities, net of related tax effects.

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Reclassifications out of Accumulated other comprehensive income (AOCI) for the quarter and year-to-date periods ended October 1, 2022 and October 2, 2021, ~~and September 26, 2020,~~ consisted of the following:


(millions)	(millions)						(millions)
Details about AOCI components	Details about AOCI components	Amount reclassified from AOCI				Line item impacted within Income Statement	Details about AOCI components	Amount reclassified from AOCI				Line item impacted within Income Statement
		Quarter ended October 2, 2021		Year-to-date period ended October 2, 2021				Quarter ended October 1, 2022		Year-to-date period ended October 1, 2022
(Gains) losses on cash flow hedges:	(Gains) losses on cash flow hedges:						(Gains) losses on cash flow hedges:

Interest rate contracts (a)	Interest rate contracts (a)	$	4	$	19	Interest expense	Interest rate contracts (a)	$	(14)	$	(6)	Interest expense

		$	4	$	19	Total before tax		$	(14)	$	(6)	Total before tax
		(1)		(5)		Tax expense (benefit)		3		1		Tax expense (benefit)
		$	3	$	14	Net of tax		$	(11)	$	(5)	Net of tax
Amortization of postretirement and postemployment benefits:	Amortization of postretirement and postemployment benefits:						Amortization of postretirement and postemployment benefits:
Net experience (gain) loss (b)	Net experience (gain) loss (b)	$	—	$	(2)	OIE	Net experience (gain) loss (b)	$	—	$	(2)	OIE

		$	—	$	(2)	Total before tax		$	—	$	(2)	Total before tax
		—		1		Tax expense (benefit)		—		1		Tax expense (benefit)
		$	—	$	(1)	Net of tax		$	—	$	(1)	Net of tax
(Gains) losses on available-for-sale securities:	(Gains) losses on available-for-sale securities:						(Gains) losses on available-for-sale securities:
Corporate bonds (a)	Corporate bonds (a)	$	(2)	$	(2)	OIE	Corporate bonds (a)	$	1	$	1	OIE
		$	(2)	$	(2)	Total before tax		$	1	$	1	Total before tax
		—		—		Tax expense (benefit)		—		—		Tax expense (benefit)
		$	(2)	$	(2)	Net of tax		$	1	$	1	Net of tax
Total reclassifications	Total reclassifications	$	1	$	11	Net of tax	Total reclassifications	$	(10)	$	(5)	Net of tax


(millions)	(millions)						(millions)
Details about AOCI components	Details about AOCI components	Amount reclassified from AOCI				Line item impacted within Income Statement	Details about AOCI components	Amount reclassified from AOCI				Line item impacted within Income Statement
		Quarter ended September 26, 2020		Year-to-date period ended September 26, 2020				Quarter ended October 2, 2021		Year-to-date period ended October 2, 2021
(Gains) losses on cash flow hedges:	(Gains) losses on cash flow hedges:						(Gains) losses on cash flow hedges:

Interest rate contracts (a)	Interest rate contracts (a)	$	4	$	11	Interest expense	Interest rate contracts (a)	$	4	$	19	Interest expense

		$	4	$	11	Total before tax		$	4	$	19	Total before tax
		(1)		(3)		Tax expense (benefit)		(1)		(5)		Tax expense (benefit)
		$	3	$	8	Net of tax		$	3	$	14	Net of tax
Amortization of postretirement and postemployment benefits:	Amortization of postretirement and postemployment benefits:						Amortization of postretirement and postemployment benefits:
Net experience loss (b)		$	—	$	(2)	OIE
Prior service cost (b)		—		(1)		OIE
Net experience (gain) loss (b)							Net experience (gain) loss (b)	$	—	$	(2)	OIE
		$	—	$	(3)	Total before tax
		—		1		Tax expense (benefit)		$	—	$	(2)	Total before tax
		$	—	$	(2)	Net of tax		—		1		Tax expense (benefit)
								$	—	$	(1)	Net of tax

(Gain) loss on available-for-sale securities:							(Gain) loss on available-for-sale securities:
Corporate bonds (a)							Corporate bonds (a)	$	(2)	$	(2)	OIE
								$	(2)	$	(2)	Total before tax
								—		—		Tax expense (benefit)
								$	(2)	$	(2)	Net of tax
Total reclassifications	Total reclassifications	$	3	$	6	Net of tax	Total reclassifications	$	1	$	11	Net of tax

(a) See Derivative instruments and fair value measurements ~~note~~note.

(b) See Employee benefits ~~note~~note.

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Accumulated other comprehensive income (loss), net of tax, as of October ~~2, 2021~~1, 2022 and January ~~2, 2021~~1, 2022 consisted of the following:


(millions)	(millions)	October 2, 2021		January 2, 2021		(millions)	October 1, 2022		January 1, 2022
Foreign currency translation adjustments	Foreign currency translation adjustments	$	(1,670)	$	(1,668)	Foreign currency translation adjustments	$	(2,225)	$	(1,748)
Net investment hedges gain (loss)						Net investment hedges gain (loss)	521		67
Cash flow hedges — unrealized net gain (loss)	Cash flow hedges — unrealized net gain (loss)	(12)		(57)		Cash flow hedges — unrealized net gain (loss)	139		(13)
Postretirement and postemployment benefits:	Postretirement and postemployment benefits:					Postretirement and postemployment benefits:
Net experience gain (loss)	Net experience gain (loss)	1		2		Net experience gain (loss)	(2)		(1)
Prior service credit (cost)	Prior service credit (cost)	(12)		(12)		Prior service credit (cost)	(26)		(26)
Available-for-sale securities unrealized net gain (loss)	Available-for-sale securities unrealized net gain (loss)	—		3		Available-for-sale securities unrealized net gain (loss)	(5)		—
Total accumulated other comprehensive income (loss)	Total accumulated other comprehensive income (loss)	$	(1,693)	$	(1,732)	Total accumulated other comprehensive income (loss)	$	(1,598)	$	(1,721)

~~Note 5 Notes payable and long-term debt~~

~~The following table presents the components of notes payable at October 2, 2021 and January 2, 2021:~~

October 2, 2021 January 2, 2021
(millions) Principal
amount Effective
interest rate Principal
amount Effective
interest rate
U.S. commercial paper $ 302 0.15 % $ 25 0.20 %
Bank borrowings 195 77
Total $ 497 $ 102

In May of 2021, the Company issued €300 million of eight-year 0.50% Euro Notes due 2029, resulting in net proceeds of €298 million after discount and underwriting commissions. The 2029 Euro Notes were issued as a sustainability bond, and thus an amount equal to the net proceeds will be used to finance or refinance, in whole or in part, one or more eligible environmental or social projects described in the Company's Sustainability Bond Framework. The Notes contain customary covenants that limit the ability of the Company and its restricted subsidiaries (as defined) to incur certain liens or enter into certain sale and lease-back transactions, as well as a change of control provision.

~~Additionally, in May of 2021, the Company repaid the €500 million, seven-year 1.75% Euro Notes due 2021, upon maturity.~~

In May of 2020, the Company issued $500 million of ten-year 2.10% Notes due 2030, resulting in net proceeds after discount and underwriting commissions of $496 million. The proceeds from these notes were used for general corporate purposes, including the payment of offering related fees and expenses, repayment of a portion of the $600 million 4.00% Notes when they matured on December 15, 2020, and repayment of a portion of commercial paper borrowings. The Notes contain customary covenants that limit the ability of the Company and its restricted subsidiaries (as defined) to incur certain liens or enter into certain sale and lease-back transactions, as well as a change of control provision.

Note 65 Employee benefits

The Company sponsors a number of U.S. and foreign pension plans as well as other nonpension postretirement and postemployment plans to provide various benefits for its employees. These plans are described within the footnotes to the Consolidated Financial Statements included in the Company’s ~~2020~~2021 Annual Report on Form 10-K. Components of Company benefit plan (income) expense for the periods presented are included in the tables below. Excluding the service cost component, these amounts are included within Other income (expense) in the Consolidated Statement of Income.

Pension


	Quarter ended				Year-to-date period ended
(millions)	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Service cost	$	6	$	9	$	23	$	27
Interest cost	34		25		91		75
Expected return on plan assets	(57)		(76)		(200)		(231)
Amortization of unrecognized prior service cost	2		2		7		6
Recognized net (gain) loss	(15)		83		(46)		63
Net periodic benefit cost	$	(30)	$	43	$	(125)	$	(60)
Curtailment (gain) loss	—		(1)		—		(1)
Total pension (income) expense	$	(30)	$	42	$	(125)	$	(61)

Other nonpension postretirement


	Quarter ended				Year-to-date period ended
(millions)	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Service cost	$	2	$	3	$	8	$	9
Interest cost	6		5		18		15
Expected return on plan assets	(28)		(23)		(83)		(69)
Amortization of unrecognized prior service cost	(2)		(2)		(7)		(6)



Total postretirement benefit (income) expense	$	(22)	$	(17)	$	(64)	$	(51)

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~~Pension~~

Quarter ended Year-to-date period ended
(millions) October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020
Service cost $ 9 $ 9 $ 27 $ 27
Interest cost 25 31 75 99
Expected return on plan assets (76) (87) (231) (257)
Amortization of unrecognized prior service cost 2 1 6 5
Recognized net (gain) loss 83 7 63 64
Net periodic benefit cost $ 43 $ (39) $ (60) $ (62)
Curtailment (gain) loss (1) — (1) (7)
Total pension (income) expense $ 42 $ (39) $ (61) $ (69)

~~Other nonpension postretirement~~

Quarter ended Year-to-date period ended
(millions) October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020
Service cost $ 3 $ 2 $ 9 $ 9
Interest cost 5 7 15 23
Expected return on plan assets (23) (24) (69) (70)
Amortization of unrecognized prior service cost (2) (1) (6) (6)
Total postretirement benefit (income) expense $ (17) $ (16) $ (51) $ (44)

Postemployment


		Quarter ended				Year-to-date period ended					Quarter ended				Year-to-date period ended
(millions)	(millions)	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020		(millions)	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Service cost	Service cost	$	1	$	1	$	3	$	3	Service cost	$	—	$	1	$	2	$	3
Interest cost	Interest cost	1		1		1		1		Interest cost	1		1		1		1
Recognized net (gain) loss		—		—		(2)		(2)
Recognized net experience (gain) loss										Recognized net experience (gain) loss	—		—		(2)		(2)
Total postemployment benefit expense	Total postemployment benefit expense	$	2	$	2	$	2	$	2	Total postemployment benefit expense	$	1	$	2	$	1	$	2

For the quarter and year-to-date periods ended October 1, 2022, the Company recognized a gain of $15 million and $46 million, respectively, related to the remeasurement of two U.S. pension plans. For the quarter and year-to-date periods ended October 2, 2021, the Company recognized a loss of $83 million and $63 million, respectively, ~~related to the remeasurement of certain U.S. pension plans. For the quarter and year-to-date periods ended September 26, 2020, the Company recognized a loss of $7 million and $15 million, respectively,~~ related to the remeasurement of atwo U.S. pension ~~plan.~~plans. These remeasurements were ~~each~~ the result of distributions that exceeded service and interest costs resulting in settlement accounting for ~~that particul~~those specificar ~~plan.~~ plans. For the quarter and year-to-date periods ended October ~~2, 2021, the remeasurement loss was driven primarily by~~ ~~lower than expected asset returns~~. ~~For the quarter and year-to-date periods ended September 26, 2020,~~ ~~the~~1, 2022, remeasurements recognized were due primarily to ~~changes~~an increase in the discount rate relative to the previous ~~measurements.~~remeasurement date partially offset by lower than expected return on plan assets. Fiscal 2022 net periodic benefit cost for the U.S. pension plans was initially determined using a weighted average discount rate of 3.0%. As a result of the remeasurements, this rate has increased to 4.0%. For the quarter and year-to-date period ended October 2, 2021, remeasurements recognized were due primarily to lower than expected return on plan assets partially offset by an increase in the discount rate relative to the previous remeasurement date.

During the second quarter of 2020, the Company recognized a curtailment gain of $7 million, as certain U.S. pension plan benefits were frozen for a portion of the population. The Company remeasured the benefit obligation for the impacted pension plan, resulting in a mark-to-market loss of $49 million. The loss was due primarily to a lower discount rate partially offset by plan asset returns in excess of the expected rate of return.

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Company contributions to employee benefit plans are summarized as follows:


(millions)	(millions)	Pension		Nonpension postretirement		Total		(millions)	Pension		Nonpension postretirement		Total
Quarter ended:	Quarter ended:							Quarter ended:
October 1, 2022								October 1, 2022	$	1	$	4	$	5
October 2, 2021	October 2, 2021	$	—	$	5	$	5	October 2, 2021	$	—	$	5	$	5
September 26, 2020		$	1	$	6	$	7
Year-to-date period ended:	Year-to-date period ended:							Year-to-date period ended:
October 1, 2022								October 1, 2022	$	2	$	15	$	17
October 2, 2021	October 2, 2021	$	2	$	13	$	15	October 2, 2021	$	2	$	13	$	15
September 26, 2020		$	4	$	15	$	19
Full year:	Full year:							Full year:
Fiscal year 2021 (projected)		$	6	$	19	$	25
Fiscal year 2020 (actual)		$	8	$	24	$	32
Fiscal year 2022 (projected)								Fiscal year 2022 (projected)	$	3	$	17	$	20
Fiscal year 2021 (actual)								Fiscal year 2021 (actual)	$	4	$	16	$	20

Plan funding strategies may be modified in response to management's evaluation of tax deductibility, market conditions, and competing investment alternatives.

~~Multi-employer pension plan exit liability~~

During the second quarter of 2020, the Company adjusted the estimated withdrawal liability associated with a plan withdrawn from during the third quarter of 2019. The adjustment resulted in a gain of $5 million during the second quarter and resulted from a July 2020 agreement with the plan under which the Company paid $7 million in full settlement of the withdrawal liability.

Note 76 Income taxes

The consolidated effective tax rate for the quarters ended October 1, 2022 and October 2, 2021 was 19% and ~~September 26, 2020 was~~ 24% ~~and 16%~~, respectively. The consolidated effective tax rate for the year-to-date periods ended October 1, 2022 and October 2, 2021 was 21% and ~~September 26, 2020 was~~ 25% ~~and 20%~~, respectively.

The lower effective tax rate for the quarter and year-to-date periods ended October 2,1, 2022, compared to the same periods in 2021, was ~~unfavorably impacted by~~due to a prior year increase in the ~~establishment of~~United Kingdom (UK) tax rate and a ~~full~~prior year valuation ~~allowance of $20 million related to certain foreign deferred tax assets.~~allowance. During the ~~current~~third quarter of 2021, the Company determined that certain foreign deferred tax assets were no longer more likely than not to be realized in the future and a $20 million full valuation allowance was recorded on a discrete period basis. ~~For the year-to-date period ended October 2, 2021, the effective tax rate was unfavorably impacted by the aforementioned valuation allowance as well as tax legislation in the United Kingdom (UK).~~ During the second quarter of 2021, the Company recorded tax expense of $23 million as a result of tax legislation enacted in the UK in June 2021, which increased the statutory UK tax rate from 19 percent to 25 percent for tax periods after April 1, 2023. The Company revalued its net deferred tax balances related to the UK business to reflect the increased tax rate.

The effective tax rate for the quarter and year-to-date periods ended September 26, 2020, were favorably impacted by the reversal of a liability for uncertain tax positions of $32 million, resulting from the finalization of a tax examination. The reserves were related to the Company's estimate of the transition tax liability in conjunction with the finalization of accounting under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act.

As of October ~~2, 2021,~~1, 2022, the Company ~~classified $13~~classified $14 million of ~~unrecognized~~unrecognized tax benefits as a net current tax liability. Management's estimate of reasonably possible changes in unrecognized tax benefits during the next twelve months consists of the current liability expected to be settled within one year, offset by ~~approximately~~approximately $3 million ofof projected additions related primarily to ongoing intercompany transfer pricing activity. Management is currently unaware of

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any issues under review that could result in significant additional payments, accruals or other material deviation in this estimate.

The Company’s total gross unrecognized tax benefits as of October ~~2, 2021 was $60~~1, 2022 was $52 million. Of this balance, ~~$51~~$45 million represents the amount that, if recognized, would affect the Company’s effective income tax rate in future periods.

The accrual balance for tax-related interest was approximately ~~$14~~$8 million at October ~~2, 2021.~~

~~Table of Contents~~1, 2022.

Note 87 Derivative instruments and fair value measurements

The Company is exposed to certain market risks such as changes in interest rates, foreign currency exchange rates, and commodity prices, which exist as a part of its ongoing business operations. Management uses derivative and nonderivative financial instruments and commodity instruments, including futures, options, and swaps, where appropriate, to manage these risks. Instruments used as hedges must be effective at reducing the risk associated with the exposure being hedged.

The Company designates derivatives and nonderivative hedging instruments as cash flow hedges, fair value hedges, net investment hedges, and uses other contracts to reduce volatility in interest rates, foreign currency and commodities. As a matter of policy, the Company does not engage in trading or speculative hedging transactions.

Derivative instruments are classified on the Consolidated Balance Sheet based on the contractual maturity of the instrument or the timing of the underlying cash flows of the instrument for derivatives with contractual maturities beyond one year. Any collateral associated with derivative instruments is classified as other assets or other current liabilities on the Consolidated Balance Sheet depending on whether the counterparty collateral is in an asset or liability position. Margin deposits related to exchange-traded commodities are recorded in accounts receivable, net on the Consolidated Balance Sheet. On the Consolidated Statement of Cash Flows, cash flows associated with derivative instruments are classified according to the nature of the underlying hedged item. Cash flows associated with collateral and margin deposits on exchange-traded commodities are classified as investing cash flows when the collateral account is in an asset position and as financing cash flows when the collateral account is in a liability position.

Total notional amounts of the Company’s derivative instruments as of October ~~2, 2021~~1, 2022 and January ~~2, 2021~~1, 2022 were as follows:


(millions)	(millions)	October 2, 2021		January 2, 2021		(millions)	October 1, 2022		January 1, 2022
Foreign currency exchange contracts	Foreign currency exchange contracts	$	3,104	$	2,856	Foreign currency exchange contracts	$	3,308	$	2,828
Cross-currency contracts	Cross-currency contracts	1,360		1,411		Cross-currency contracts	1,815		1,343
Interest rate contracts	Interest rate contracts	2,836		2,632		Interest rate contracts	2,579		2,816
Commodity contracts	Commodity contracts	393		314		Commodity contracts	362		360
Total	Total	$	7,693	$	7,213	Total	$	8,064	$	7,347

Following is a description of each category in the fair value hierarchy and the financial assets and liabilities of the Company that were included in each category at October ~~2, 2021~~1, 2022 and January ~~2, 2021,~~1, 2022, measured on a recurring basis.

Level 1 – Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market. For the Company, level 1 financial assets and liabilities consist primarily of commodity derivative contracts.

Level 2 – Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. For the Company, level 2 financial assets and liabilities consist of interest rate swaps, cross-currency swaps and over-the-counter commodity and currency contracts.

The Company’s calculation of the fair value of interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the interest rate curve. Over-the-counter commodity derivatives are valued using an income approach based on the commodity index prices less the contract rate multiplied by the notional amount. Foreign currency contracts are valued using an income approach based on forward rates less the contract

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rate multiplied by the notional amount. Cross-currency contracts are valued based on changes in the spot rate at the time of valuation compared to the spot rate at the time of execution, as well as the change in the interest differential between the two currencies. The Company’s calculation of the fair value of level 2 financial assets and liabilities takes into consideration the risk of nonperformance, including counterparty credit risk.

Level 3 – Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability. The Company did not have any level 3 financial assets or liabilities as of October ~~2, 2021~~1, 2022 or January ~~2, 2021.~~1, 2022.

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The following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheet on a recurring basis as of October ~~2, 2021~~1, 2022 and January ~~2, 2021:~~1, 2022:

Derivatives designated as hedging instruments


		October 2, 2021						January 2, 2021							October 1, 2022						January 1, 2022
(millions)	(millions)	Level 1		Level 2		Total		Level 1		Level 2		Total		(millions)	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:	Assets:													Assets:
Cross-currency contracts:	Cross-currency contracts:													Cross-currency contracts:
Other current assets	Other current assets	$	—	$	27	$	27	$	—	$	14	$	14	Other current assets	$	—	$	82	$	82	$	—	$	32	$	32
Other assets	Other assets	—		15		15		—		16		16		Other assets	—		202		202		—		15		15
Interest rate contracts(a):	Interest rate contracts(a):													Interest rate contracts(a):
Other current assets	Other current assets	—		46		46		—		—		—		Other current assets	—		—		—		—		10		10
Other assets	Other assets	—		51		51		—		60		60		Other assets	—		62		62		—		8		8
Total assets	Total assets	$	—	$	139	$	139	$	—	$	90	$	90	Total assets	$	—	$	346	$	346	$	—	$	65	$	65
Liabilities:	Liabilities:													Liabilities:

Cross-currency contracts:	Cross-currency contracts:													Cross-currency contracts:
Other current liabilities	Other current liabilities	$	—	$	—	$	—	$	—	$	(13)	$	(13)	Other current liabilities	$	—	$	(1)	$	(1)	$	—	$	(2)	$	(2)
Other Liabilities		—		(7)		(7)		—		(21)		(21)
Other liabilities														Other liabilities	—		(5)		(5)		—		(7)		(7)
Interest rate contracts:	Interest rate contracts:													Interest rate contracts:
Other current liabilities	Other current liabilities	—		—		—		—		(3)		(3)		Other current liabilities	—		—		—		—		(1)		(1)

Other liabilities														Other liabilities	—		(86)		(86)		—		(4)		(4)

Total liabilities	Total liabilities	$	—	$	(7)	$	(7)	$	—	$	(37)	$	(37)	Total liabilities	$	—	$	(92)	$	(92)	$	—	$	(14)	$	(14)

(a) The fair value of the related hedged portion of the Company's long-term debt, a level 2 liability, was $1.0 billion as of October 1, 2022 and $1.2 billion as of ~~October 2, 2021 and $0.8 billion as~~January 1, 2022.

Table of ~~January 2, 2021.~~Contents

Derivatives not designated as hedging instruments


		October 2, 2021						January 2, 2021							October 1, 2022						January 1, 2022
(millions)	(millions)	Level 1		Level 2		Total		Level 1		Level 2		Total		(millions)	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:	Assets:													Assets:
Foreign currency exchange contracts:	Foreign currency exchange contracts:													Foreign currency exchange contracts:
Other current assets	Other current assets	$	—	$	30	$	30	$	—	$	48	$	48	Other current assets	$	—	$	142	$	142	$	—	$	18	$	18
Other assets	Other assets	—		3		3		—		—		—		Other assets	—		17		17		—		5		5
Interest rate contracts:	Interest rate contracts:													Interest rate contracts:
Other current assets	Other current assets	—		4		4		—		4		4		Other current assets	—		2		2		—		4		4
Other assets	Other assets	—		4		4		—		13		13		Other assets	—		20		20		—		—		—
Commodity contracts:	Commodity contracts:													Commodity contracts:
Other current assets	Other current assets	17		—		17		9		—		9		Other current assets	5		—		5		5		—		5
Total assets	Total assets	$	17	$	41	$	58	$	9	$	65	$	74	Total assets	$	5	$	181	$	186	$	5	$	27	$	32
Liabilities:	Liabilities:													Liabilities:
Foreign currency exchange contracts:	Foreign currency exchange contracts:													Foreign currency exchange contracts:
Other current liabilities	Other current liabilities	$	—	$	(41)	$	(41)	$	—	$	(73)	$	(73)	Other current liabilities	$	—	$	(126)	$	(126)	$	—	$	(20)	$	(20)
Other liabilities	Other liabilities	—		(5)		(5)		—		(4)		(4)		Other liabilities	—		(10)		(10)		—		(6)		(6)
Interest rate contracts:	Interest rate contracts:													Interest rate contracts:
Other current liabilities	Other current liabilities	—		(7)		(7)		—		(6)		(6)		Other current liabilities	—		(4)		(4)		—		(6)		(6)
Other liabilities	Other liabilities	—		(11)		(11)		—		(22)		(22)		Other liabilities	—		(24)		(24)		—		(7)		(7)
Commodity contracts:	Commodity contracts:													Commodity contracts:
Other current liabilities	Other current liabilities	(1)		—		(1)		(1)		—		(1)		Other current liabilities	(10)		—		(10)		(6)		—		(6)

Total liabilities	Total liabilities	$	(1)	$	(64)	$	(65)	$	(1)	$	(105)	$	(106)	Total liabilities	$	(10)	$	(164)	$	(174)	$	(6)	$	(39)	$	(45)

The Company has designated its outstanding foreign currency denominated debt as a net investment hedge of a portion of the Company’s investment in its subsidiaries’ foreign currency denominated net assets. The carrying value of this debt, including current and long-term, was approximately $2.0 billion as of October 1, 2022 and $2.4 billion as of ~~October 2, 2021 and $2.8 billion as of~~ January ~~2, 2021.~~

~~Table of Contents~~

1, 2022.

The following amounts were recorded on the Consolidated Balance Sheet related to cumulative basis adjustments for existing fair value hedges as of October ~~2, 2021~~1, 2022 and January ~~2, 2021.~~1, 2022.


(millions)	(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)				(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)
			October 2, 2021		January 2, 2021		October 2, 2021		January 2, 2021				October 1, 2022		January 1, 2022		October 1, 2022		January 1, 2022

Interest rate contracts	Interest rate contracts	Long-term debt	$	2,940	$	2,568	$	22	$	25	Interest rate contracts	Current maturities of long-term debt	$	209	$	—	$	(2)	$	—
Interest rate contracts											Interest rate contracts	Long-term debt	$	2,413	$	2,903	$	(76)	$	12

(a) The ~~hedged~~fair value adjustment related to current maturities of long-term debt includes ~~$14~~($2) million ~~and $16 millionof hedging adjustment on~~from discontinued hedging relationships as of October ~~2, 2021~~1, 2022. The fair value adjustment related to long-term debt includes $12 million and $13 million from discontinued hedging relationships as of October 1, 2022 and January ~~2, 2021,~~1, 2022, respectively.

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The Company has elected to not offset the fair values of derivative assets and liabilities executed with the same counterparty that are generally subject to enforceable netting agreements. However, if the Company were to offset and record the asset and liability balances of derivatives on a net basis, the amounts presented in the Consolidated Balance Sheet as of October ~~2, 2021~~1, 2022 and January ~~2, 2021~~1, 2022 would be adjusted as detailed in the following table:



As of October 2, 2021:				Gross Amounts Not Offset in the Consolidated Balance Sheet
As of October 1, 2022:										As of October 1, 2022:			Gross Amounts Not Offset in the Consolidated Balance Sheet
		Amounts Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received/ Posted		Net Amount			Amounts Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received/ Posted		Net Amount
Total asset derivatives	Total asset derivatives	$	197	$	(59)	$	—	$	138	Total asset derivatives	$	532	$	(225)	$	—	$	307
Total liability derivatives	Total liability derivatives	$	(72)	$	59	$	7	$	(6)	Total liability derivatives	$	(266)	$	225	$	40	$	(1)

As of January 2, 2021:

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 $ 164 $ (116) $ — $ 48
Total liability derivatives $ (143) $ 116 $ 5 $ (22)



As of January 1, 2022:			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	$	97	$	(47)	$	8	$	58
Total liability derivatives	$	(59)	$	47	$	12	$	—

During the quarter and year-to-date periods ended October 1, 2022, the Company settled certain interest rate contracts resulting in a net realized gain of approximately $83 million and $165 million, respectively. These derivatives were accounted for as cash flow hedges and the related net gains were recorded in accumulated other comprehensive income and will be amortized to interest expense over the term of the related forecasted fixed rate debt, once issued. During the quarter ended October 1, 2022, the Company recognized an $18 million gain related to a portion of certain forward-starting interest rate swaps no longer designated as cash flow hedges due to changes in forecasted debt issuance.

Additionally, during the year-to-date period ended October 1, 2022, the Company settled certain cross currency swaps resulting in a net gain of $37 million. These cross currency swaps were accounted for as net investment hedges and the related net gain was recorded in accumulated other comprehensive income.

The effect of derivative instruments on the Consolidated Statements of Income and Comprehensive Income for the quarters ended October 1, 2022 and October 2, 2021 ~~and September 26, 2020~~ was as follows:

Derivatives and non-derivatives in net investment hedging relationships


(millions)	(millions)	Gain (loss) recognized in AOCI				Gain (loss) excluded from assessment of hedge effectiveness				Location of gain (loss) in income of excluded component	(millions)	Gain (loss) recognized in AOCI				Gain (loss) excluded from assessment of hedge effectiveness				Location of gain (loss) in income of excluded component
		October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020				October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Foreign currency denominated long-term debt	Foreign currency denominated long-term debt	$	57	$	(94)	$	—	$	—		Foreign currency denominated long-term debt	$	137	$	57	$	—	$	—
Cross-currency contracts	Cross-currency contracts	30		(61)		5		8		Interest expense	Cross-currency contracts	123		30		11		5		Interest expense
Total	Total	$	87	$	(155)	$	5	$	8		Total	$	260	$	87	$	11	$	5

Derivatives not designated as hedging instruments


(millions)	(millions)	Location of gain (loss) recognized in income	Gain (loss) recognized in income				(millions)	Location of gain (loss) recognized in income	Gain (loss) recognized in income
			October 2, 2021		September 26, 2020				October 1, 2022		October 2, 2021
Foreign currency exchange contracts	Foreign currency exchange contracts	COGS	$	13	$	(3)	Foreign currency exchange contracts	COGS	$	14	$	13
Foreign currency exchange contracts	Foreign currency exchange contracts	Other income (expense), net	(1)		(1)		Foreign currency exchange contracts	Other income (expense), net	(9)		(1)
Foreign currency exchange contracts	Foreign currency exchange contracts	SG&A	1		(1)		Foreign currency exchange contracts	SG&A	3		1

Interest rate contracts							Interest rate contracts	Interest expense	1		—
Commodity contracts	Commodity contracts	COGS	29		17		Commodity contracts	COGS	(1)		29

Total	Total		$	42	$	12	Total		$	8	$	42

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The effect of derivative instruments on the Consolidated Statements of Income and Comprehensive Income for the year-to-date periods ended October 1, 2022 and October 2, 2021 ~~and September 26, 2020~~ was as follows:

Derivatives and non-derivatives in net investment hedging relationships


(millions)	(millions)	Gain (loss) recognized in AOCI				Gain (loss) excluded from assessment of hedge effectiveness				Location of gain (loss) in income of excluded component	(millions)	Gain (loss) recognized in AOCI				Gain (loss) excluded from assessment of hedge effectiveness				Location of gain (loss) in income of excluded component
		October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020				October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Foreign currency denominated long-term debt	Foreign currency denominated long-term debt	$	128	$	(103)	$	—	$	—		Foreign currency denominated long-term debt	$	339	$	128	$	—	$	—
Cross-currency contracts	Cross-currency contracts	47		1		15		26		Interest expense	Cross-currency contracts	277		47		28		15		Interest expense
Total	Total	$	175	$	(102)	$	15	$	26		Total	$	616	$	175	$	28	$	15

Derivatives not designated as hedging instruments


(millions)	(millions)	Location of gain (loss) recognized in income	Gain (loss) recognized in income				(millions)	Location of gain (loss) recognized in income	Gain (loss) recognized in income
			October 2, 2021		September 26, 2020				October 1, 2022		October 2, 2021
Foreign currency exchange contracts	Foreign currency exchange contracts	COGS	$	(13)	$	43	Foreign currency exchange contracts	COGS	$	34	$	(13)
Foreign currency exchange contracts	Foreign currency exchange contracts	Other income (expense), net	(2)		5		Foreign currency exchange contracts	Other income (expense), net	(18)		(2)
Foreign currency exchange contracts	Foreign currency exchange contracts	SGA	6		3		Foreign currency exchange contracts	SGA	8		6
Interest rate contracts	Interest rate contracts	Interest expense	1		1		Interest rate contracts	Interest expense	3		1
Commodity contracts	Commodity contracts	COGS	96		(33)		Commodity contracts	COGS	33		96

Total	Total		$	88	$	19	Total		$	60	$	88

The effect of fair value and cash flow hedge accounting on the Consolidated Income Statement for the quarters ended October 1, 2022 and October 2, ~~2021 and September 26, 2020:~~2021:


			October 2, 2021		September 26, 2020				October 1, 2022		October 2, 2021
(millions)	(millions)		Interest Expense		Interest Expense		(millions)		Interest Expense		Interest Expense
Total amounts of income and expense line items presented in the Consolidated Income Statement in which the effects of fair value or cash flow hedges are recorded	Total amounts of income and expense line items presented in the Consolidated Income Statement in which the effects of fair value or cash flow hedges are recorded		$	55	$	63	Total amounts of income and expense line items presented in the Consolidated Income Statement in which the effects of fair value or cash flow hedges are recorded		$	39	$	55
		Gain (loss) on fair value hedging relationships:						Gain (loss) on fair value hedging relationships:
		Interest contracts:						Interest contracts:
		Hedged items	3		(2)			Hedged items	35		3
		Derivatives designated as hedging instruments	(2)		2			Derivatives designated as hedging instruments	(34)		(2)

		Gain (loss) on cash flow hedging relationships:						Gain (loss) on cash flow hedging relationships:
		Interest contracts:						Interest contracts:
		Amount of gain (loss) reclassified from AOCI into income	(4)		(4)			Amount of gain (loss) reclassified from AOCI into income	14		(4)

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The effect of fair value and cash flow hedge accounting on the Consolidated Income Statement for the year-to-date periods ended October 1, 2022 and October 2, ~~2021 and September 26, 2020:~~2021:


			October 2, 2021		September 26, 2020				October 1, 2022		October 2, 2021
(millions)	(millions)		Interest Expense		Interest Expense		(millions)		Interest Expense		Interest Expense
Total amounts of income and expense line items presented in the Consolidated Income Statement in which the effects of fair value or cash flow hedges are recorded	Total amounts of income and expense line items presented in the Consolidated Income Statement in which the effects of fair value or cash flow hedges are recorded		$	172	$	196	Total amounts of income and expense line items presented in the Consolidated Income Statement in which the effects of fair value or cash flow hedges are recorded		$	149	$	172
		Gain (loss) on fair value hedging relationships:						Gain (loss) on fair value hedging relationships:
		Interest contracts:						Interest contracts:
		Hedged items	3		(5)			Hedged items	89		3
		Derivatives designated as hedging instruments	(2)		6			Derivatives designated as hedging instruments	(85)		(2)

		Gain (loss) on cash flow hedging relationships:						Gain (loss) on cash flow hedging relationships:
		Interest contracts:						Interest contracts:
		Amount of gain (loss) reclassified from AOCI into income	(19)		(11)			Amount of gain (loss) reclassified from AOCI into income	6		(19)

During the next 12 months, the Company expects ~~$17~~$18 million of net deferred losses reported in AOCI at October ~~2, 2021~~1, 2022 to be reclassified to income, assuming market rates remain constant through contract maturities.

Certain of the Company’s derivative instruments contain provisions requiring the Company to post collateral on those derivative instruments that are in a liability position if the Company’s credit rating is at or below BB+ (S&P), or Baa1 (Moody’s). The fair value of all derivative instruments with credit-risk-related contingent features in a liability position on October ~~2, 2021~~1, 2022 was not material. In addition, certain derivative instruments contain provisions that would be triggered in the event the Company defaults on its debt agreements. There were no collateral posting requirements as of October ~~2, 2021~~1, 2022 triggered by credit-risk-related contingent features.

Other fair value measurements

~~Marketable Securities~~

During the quarter and year-to-date periods ended September 26, 2020, the Company invested $50 million and $250 million, respectively, in a mutual fund holding short term debt securities. The investment was measured at fair value using the net asset value (NAV) per share as a practical expedient and as a result, this investment has not been classified in the fair value hierarchy. As of September 26, 2020, fair value using NAV was $250 million.

Available for sale securities


		October 2, 2021						January 2, 2021							October 1, 2022						January 1, 2022
				Unrealized						Unrealized							Unrealized						Unrealized
(millions)	(millions)	Cost		Gain (Loss)		Market Value		Cost		Gain (Loss)		Market Value		(millions)	Cost		Gain (Loss)		Market Value		Cost		Gain (Loss)		Market Value
Corporate bonds	Corporate bonds	$	51	$	—	$	51	$	62	$	3	$	65	Corporate bonds	$	52	$	(6)	$	46	$	52	$	—	$	52

During the year-to-date period ended October 1, 2022, the Company sold approximately $14 million of investments in level 2 corporate bonds. The resulting loss was approximately $1 million and recorded in Other income and (expense). Also during the year-to-date period ended October 1, 2022, the Company purchased approximately $15 million in level 2 corporate bonds. During the year-to-date period ended October 2, 2021, the ~~Company's~~Company sold approximately $69 million of investments in level 2 corporate ~~bonds were sold for~~bonds. The resulting gain from the sale of these investments was approximately ~~$69~~$2 million ~~resulting in a gain of $2 million,~~and recorded in Other income and (expense). Also during the year-to-date period ended October 2, 2021, the Company ~~invested~~purchased approximately $56 million in level 2 corporate bonds.

The market values of the Company's investments in level 2 corporate bonds are based on matrices or models from pricing vendors. Unrealized gains and losses are included in the Consolidated Statement of Comprehensive Income. Additionally, these investments are recorded within Other current assets and Other assets on the Consolidated Balance Sheet, based on the maturity of the individual security. The maturity dates of the securities range from ~~2022~~2024 to 2036.

The Company reviews its investment portfolio for any unrealized losses that would be deemed other-than-temporary and requires the recognition of an impairment loss in earnings. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than its cost, the Company's intent to hold the investment, and whether it is more likely than not that the Company will be required to sell the investment before recovery of the cost basis. The Company also considers

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the type of security, related industry and sector performance, and published investment ratings. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. If conditions within individual markets, industry segments, or macro-economic environments deteriorate, the Company could incur future impairments.

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Equity investments

We hold equity investments in certain companies that we do not have the ability to exercise significant influence. Equity investments without a readily determinable fair value are recorded at original cost. Investments with a readily determinable fair value, which are level 2 investments, are measured at fair value based on observable market price changes, with gains and losses recorded through net earnings. Equity investments were approximately $40 million as of October 1, 2022 and January 1, 2022.Additionally, these investments were recorded within Other noncurrent assets on the Consolidated Balance Sheet.

Financial instruments

The carrying values of the Company’s short-term items, including cash, cash equivalents, accounts receivable, accounts payable, notes payable and current maturities of long-term debt approximate fair value. The fair value of the Company’s long-term debt, which are level 2 liabilities, is calculated based on broker quotes. The fair value and carrying value of the Company's long-term debt was ~~$7.8~~$5.4 billion and ~~$7.0~~$5.7 billion, respectively, as of October ~~2, 2021.~~1, 2022. The fair value and carrying value of the Company's long-term debt was ~~$7.7~~$6.9 billion and ~~$6.7~~$6.3 billion, respectively, as of January ~~2, 2021.~~1, 2022.

Counterparty credit risk concentration and collateral requirements

The Company is exposed to credit loss in the event of nonperformance by counterparties on derivative financial and commodity contracts. Management believes a concentration of credit risk with respect to derivative counterparties is limited due to the credit ratings and use of master netting and reciprocal collateralization agreements with the counterparties and the use of exchange-traded commodity contracts.

Master netting agreements apply in situations where the Company executes multiple contracts with the same counterparty. Certain counterparties represent a concentration of credit risk to the Company. If those counterparties fail to perform according to the terms of derivative contracts, this would result in a loss to the Company of approximately ~~$101~~$254 million, net of collateral already received from those counterparties, as of October ~~2, 2021.~~1, 2022.

For certain derivative contracts, reciprocal collateralization agreements with counterparties call for the posting of collateral in the form of cash, treasury securities or letters of credit if a fair value loss position to the Company or its counterparties exceeds a certain amount. In addition, the Company is required to maintain cash margin accounts in connection with its open positions for exchange-traded commodity derivative instruments executed with the counterparty that are subject to enforceable netting agreements. As of October ~~2, 2021,~~1, 2022, the Company posted $7$34 million in margin deposits for exchange-traded commodity derivative instruments, which was reflected as an increase in accounts receivable, net on the Consolidated Balance Sheet.

Management believes concentrations of credit risk with respect to accounts receivable is limited due to the generally high credit quality of the Company’s major customers, as well as the large number and geographic dispersion of smaller customers. However, the Company conducts a disproportionate amount of business with a small number of large multinational grocery retailers, with the five largest accounts encompassing approximately 22% of consolidated trade receivables at October 2, 2021.

Note 98 Reportable segments

Kellogg Company is a leading producer of snacks, cereal, and frozen foods. It is the second largest producer of crackers, ~~and~~ a leading producer of savory snacks, and the world's leading producer of cereal. Additional product offerings include toaster pastries, cereal bars, veggie foods and noodles. Kellogg products are manufactured and marketed globally. Principal markets for these products include the United States, United Kingdom, Nigeria, Canada, Mexico, and Australia.

The Company manages its operations through 4four operating segments that are based on geographic location – North America which includes U.S. businesses and Canada; Europe which consists 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 also represent our reportable segments.

Corporate includes corporate administration and initiatives as well as share-based compensation.

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The measurement of reportable segment results is based on segment operating profit which is generally consistent with the presentation of operating profit in the Consolidated Statement of Income. Reportable segment results were as follows:

Quarter ended Year-to-date period ended
(millions) October 2,
2021 September 26,
2020 October 2,
2021 September 26,
2020
Net sales
North America $ 2,056 $ 2,059 $ 6,199 $ 6,323
Europe 631 552 1,827 1,624
Latin America 252 236 754 686
AMEA 683 582 1,981 1,673
Consolidated $ 3,622 $ 3,429 $ 10,761 $ 10,306
Operating profit
North America $ 328 $ 321 $ 1,070 $ 1,151
Europe 96 63 277 224
Latin America 29 31 88 84
AMEA 60 58 186 142
Total Reportable Segments 513 473 1,621 1,601
Corporate (66) (62) (198) (225)
Consolidated $ 447 $ 411 $ 1,423 $ 1,376


	Quarter ended				Year-to-date period ended
(millions)	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Net sales
North America	$	2,338	$	2,056	$	6,696	$	6,199
Europe	562		631		1,749		1,827
Latin America	282		252		826		754
AMEA	767		683		2,217		1,981
Total Reportable Segments	3,949		3,622		11,488		10,761
Corporate	(3)		—		(6)		—
Consolidated	$	3,946	$	3,622	$	11,482	$	10,761
Operating profit
North America	$	322	$	328	$	1,043	$	1,070
Europe	75		96		280		277
Latin America	29		29		82		88
AMEA	64		60		192		186
Total Reportable Segments	490		513		1,597		1,621
Corporate	(122)		(66)		(297)		(198)
Consolidated	$	368	$	447	$	1,300	$	1,423

Supplemental product information is provided below for net sales to external customers:

Quarter ended Year-to-date period ended
(millions) October 2,
2021 September 26,
2020 October 2,
2021 September 26,
2020
Snacks $ 1,712 $ 1,593 $ 5,015 $ 4,669
Cereal 1,313 1,324 4,023 4,093
Frozen 277 279 841 857
Noodles and other 320 233 882 687
Consolidated $ 3,622 $ 3,429 $ 10,761 $ 10,306


	Quarter ended				Year-to-date period ended
(millions)	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Snacks	$	1,943	$	1,712	$	5,635	$	5,015
Cereal	1,355		1,313		3,978		4,023
Frozen	281		277		829		841
Noodles and other	367		320		1,040		882
Consolidated	$	3,946	$	3,622	$	11,482	$	10,761

Note 109 Supplemental Financial Statement Data

Consolidated Balance Sheet
(millions) October 2, 2021 (unaudited) January 2, 2021
Trade receivables $ 1,441 $ 1,272
Allowance for credit losses (17) (19)
Refundable income taxes 20 66
Other receivables 236 218
Accounts receivable, net $ 1,680 $ 1,537
Raw materials and supplies $ 374 $ 338
Finished goods and materials in process 1,004 946
Inventories $ 1,378 $ 1,284
Intangible assets not subject to amortization $ 2,048 $ 2,068
Intangible assets subject to amortization, net 393 423
Other intangibles, net $ 2,441 $ 2,491


Consolidated Balance Sheet
(millions)	October 1, 2022 (unaudited)		January 1, 2022
Trade receivables	$	1,677	$	1,240
Allowance for credit losses	(12)		(15)
Refundable income taxes	88		62
Other receivables	232		202
Accounts receivable, net	$	1,985	$	1,489
Raw materials and supplies	$	422	$	383
Finished goods and materials in process	1,260		1,015
Inventories	$	1,682	$	1,398
Intangible assets not subject to amortization	$	1,957	$	2,031
Intangible assets subject to amortization, net	345		378
Other intangibles, net	$	2,302	$	2,409

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~~Note 11 Contingencies~~

The Company is subject to various legal proceedings, claims, and governmental inspections or investigations in the ordinary course of business covering matters such as general commercial, governmental regulations, antitrust and trade regulations, product liability, environmental, intellectual property, workers’ compensation, employment and other actions. These matters are subject to uncertainty and the outcome is not predictable with assurance. The Company uses a combination of insurance and self-insurance for a number of risks, including workers’ compensation, general liability, automobile liability and product liability.

In 2016, a class action complaint was filed against Kellogg in the Northern District of California relating to statements made on packaging for certain products. In August 2019, the Court ruled in favor of the plaintiff regarding certain statements made on the Company’s products and ordered the parties to conduct settlement discussions related to all matters in dispute. In October 2019, the plaintiff filed a motion to the Court to approve a settlement between Kellogg and the class. During 2019, the Company concluded that the contingency related to the unfavorable ruling was probable and estimable, resulting in a liability being recorded. In January 2021, the parties reached a new settlement that was within the amount of the contingency the Company recorded in December 2019. In June 2021, the court entered an order granting preliminary approval of the settlement.

The Company has established accruals for certain matters where losses are deemed probable and reasonably estimable. There are other claims and legal proceedings pending against the Company for which accruals have not been established. It is reasonably possible that some of these matters could result in an unfavorable judgment against the Company and could require payment of claims in amounts that cannot be estimated at October 2, 2021. Based upon current information, management does not expect any of the claims or legal proceedings pending against the Company to have a material impact on the Company’s consolidated financial statements.

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KELLOGG COMPANY

PART I—FINANCIAL INFORMATION

Item 2. 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, 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 115 years, consumers have counted on Kellogg for great-tasting, high-quality and nutritious foods. Currently, these foods include snacks, such as crackers, savory snacks, toaster pastries, cereal bars and bites; and convenience foods, such as, ready-to-eat cereals, frozen waffles, veggie foods and noodles. Kellogg products are manufactured and marketed globally.

Proposed separation transactions

War in Ukraine

The war in Ukraine and the related sanctions imposed have increased global economic and geopolitical uncertainty. In March 2022, we suspended all new investments and shipments of all products to Russia. We have no employees or direct operations in Ukraine. Our business in Russia consists of three manufacturing facilities and represented less than 1.5% of consolidated net sales and approximately 1% of consolidated operating profit for the year ended January 1, 2022. The net book value of assets related to our Russia business represents less than 0.5% of total assets as of October 1, 2022.

Impacts of the war to our net sales, earnings, and cash flows extends beyond our business in Russia. Regional or global economic recessions, inflation, and supply chain challenges as a result of the war or further escalation could have a material impact on our results. Refer to Risk Factors in Part I, Item 1A to our Annual Report on Form 10-K for the fiscal year ended January 1, 2022.

COVID-19 ~~Response~~

Since the World Health Organization categorized the novel coronavirus (COVID-19) as a pandemic in March 2020, our key objectives continue to be 1) protecting the health and safety of our employees, 2) safely producing and delivering our foods to customers and consumers, and 3) supporting the communities in which we operate. Our efforts have been led by the Company’s Executive Committee, a committee composed of senior leaders, and our global Crisis Management Process. As part of that process, we have worked closely with medical, regulatory and other experts as we deliver on our objectives.

~~Protect employee health and safety~~

The health and safety of our employees is our top priority. From the outset of the pandemic, the Company has designed and implemented a number of actions across the business including restricting travel and visitors to its facilities, limiting external group meetings and establishing safety procedures for any potentially exposed employees. At this time, most of our office employees continue to work remotely to minimize the exposure of our employees to COVID-19.For those who are not able to work remotely, the Company has implemented enhanced protocols at all of our facilities to protect our employees, including temperature checks, social distancing, response plans, face coverings, contact tracing, enhanced sanitation procedures, and additional personal protection equipment

~~Maintain our ability to produce and deliver essential food supply~~

In addition to our efforts to keep our people safe, the Company has taken several actions to ensure that we maintain our ability to operate effectively during this pandemic, providing our foods to our customers and consumers. In certain parts of the world, the reacceleration of COVID cases has brought new governmental restrictions, in some instances causing temporary reductions in production. Additionally, as a result of global supply imbalances, we have managed through bottlenecks and shortages of materials, labor, and freight that have required us to pursue alternative sources, incremental capacity, and temporary labor. We continue to take the appropriate actions to ensure the continuity of our business.

We have partnered with our strategic technology providers in order to maintain support for our critical business and finance systems as well as additional network bandwidth and support for the transition to a work-from-home environment.~~We have worked to mitigate system-related risks in this environment through heightened monitoring of cybersecurity and network capacity as well as reevaluation of contingency plans.~~

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~~Support communities~~

Kellogg is a company with a heart and soul, and we are working together across our company to help our food bank partners and neighbors in need. Kellogg and our charitable funds have donated cash and food to global COVID-19 hunger relief efforts. ~~As always, through our global Kellogg’s~~® Better Days purpose platform, we help deliver critical nourishment to people when they need it most. Local governments have identified food security as a top priority in their fight against COVID-19. Kellogg is providing support to our food bank partners on the front-lines, helping those who may not know where their next meal is coming from.

~~Monitoring future impacts~~

~~The severity, magnitude and duration of the current COVID-19 pandemic is uncertain and rapidly changing.~~ The Company continues to actively monitor ~~the pandemic including, infection~~COVID-19 and ~~hospitalization rates, vaccination efforts, and related governmental actions such as expanded or reduced stay-at home orders and social distancing guidelines. We~~ will adjust our mitigation strategies as necessary to address any changing health, operational or financial risks that may arise. ~~Since~~During the ~~onset~~first year of the pandemic, the Company ~~has~~ experienced a significant increase in demand for ~~our retail products as consumers stocked up on~~ food for at-home ~~consumption in those markets.~~ consumption.While this demand has moderated for certain products, we will continue to manage our production capacity during this period of volatility.We continue to monitor the business for adverse impacts of the pandemic, including volatility in the foreign exchange markets, reduced demand in our away from home businesses, supply-chain disruptions in certain markets, increased costs of ~~employee safety and~~ maintaining food supply, and potential disruptions for certain emerging market countries. In the event the Company experiences adverse impacts from the above or other factors, the Company would also evaluate the need to perform interim impairment tests ~~for~~of the Company’s goodwill, indefinite lived intangible assets, investments in unconsolidated affiliates and property, plant and equipment.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. See further discussion within Future Outlook.

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Inflationary pressures

Events such as the ongoing COVID-19 pandemic and the war in Ukraine have resulted in certain impacts to the global economy, including market disruptions, supply chain challenges, and inflationary pressures. During the quarter ended October 1, 2022 we continued to experience elevated commodity and supply chain costs, including logistics, procurement, and manufacturing costs. We expect these market disruptions and inflationary pressures to continue throughout 2022.

Segments

We manage our operations through four operating segments that are based primarily on geographic 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 also represent our reportable segments.

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 currency-neutral and organic net sales, 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, adjusted effective tax rate, net debt, and cash flow. We determine currency-neutral 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.

•Currency-neutral net sales and organic net sales: We adjust the GAAP financial measure to exclude the impact of foreign currency, resulting in currency-neutral net sales. In addition, we exclude the impact of acquisitions, divestitures, and foreign currency, ~~and differences in shipping days including the 53rd week,~~ resulting in organic net sales. We excluded the items which we believe may obscure trends in our underlying net sales performance. By providing these non-GAAP net sales measures, management intends to provide investors with a meaningful, consistent comparison of net sales performance for the Company

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and each of our reportable segments for the periods presented. Management uses these non-GAAP measures to evaluate the effectiveness of initiatives behind net sales growth, pricing realization, and the impact of mix on our business results. These non-GAAP measures are also used to make decisions regarding the future direction of our business, and for resource allocation decisions.

•Adjusted: gross profit, gross margin, operating profit and diluted EPS: We adjust the GAAP financial measures to exclude the effect of restructuring programs, costs of the planned separation transactions, mark-to-market adjustments for pension plans (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, ~~multi-employer pension plan withdrawal liabilities, gain/loss~~a gain on ~~the divestiture,~~interest rate swaps, and other costs impacting comparability resulting in 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 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, as well as to evaluate the impacts of inflationary pressures and decisions to invest in new initiatives within each of our segments.

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•Currency-neutral adjusted: gross profit, gross margin, operating profit, and diluted EPS: We adjust the GAAP financial measures to exclude the effect of restructuring programs, costs of the planned separation transactions, mark-to-market adjustments for pension plans (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, ~~multi-employer pension plan withdrawal liabilities, gain/loss~~a gain on ~~the divestiture,~~interest rate swaps, other costs 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 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, 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 of the planned separation transactions, mark-to-market adjustments for pension plans (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, ~~multi-employer pension plan withdrawal liabilities, gain/loss~~a gain on ~~the divestiture,~~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 adjusted effective income tax rate, and other impacts to tax expense, including tax reform in the UK ~~and U.S.~~ and certain foreign valuation allowances. 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 and marketable securities. With respect to net debt, cash and cash equivalents and marketable securities 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 flow: Defined as net cash provided by operating activities reduced by expenditures for property additions. 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.

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Significant items impacting comparability

Mark-to-market ~~accounting for pension plans, commodity contracts, certain equity investments, 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 commodity contracts and certain foreign currency contracts result in gains/losses that are recognized in the quarter they occur. We recorded a pre-tax mark-to-market loss of $43 million and $69 million for the quarter and year-to-date periods ended October 1, 2022, respectively. Included within the aforementioned was a pre-tax mark-to-market benefit for pension plans of $15 million and $46 million for the quarter and year-to-date periods ended October 1, 2022, respectively. Additionally, we recorded a pre-tax mark-to-market expense of $59 million and $45 million for the quarter and year-to-date periods ended October 2, 2021, respectively. Included within the aforementioned was a pre-tax mark-to-market expense for pension plans of $83 million and $63 million for the quarter and year-to-date periods ended October 2, 2021, ~~respectively~~respectively.

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Separation costs

The Company continues to work towards its planned separations of its North America cereal and plant-based businesses. As a result, we incurred pre-tax ~~mark-to-market gain on equity investments~~charges related to the planned separation, primarily related to legal and consulting costs, of ~~$20~~$18 million and $22 million for the quarter and year-to-date periods ended October 2, 2021. Additionally, we recorded a pre-tax mark-to-market expense of $3 million and $71 million for the quarter and year-to-date periods ended September 26, 2020, respectively. Included within the aforementioned was a pre-tax mark-to-market expense for pension plans of $7 million and $64 million for the quarter and year-to-date periods ended September 26, 2020,1, 2022, respectively.

Business and portfolio realignment

One-time 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 completed and prospective divestitures and ~~acquisitions, including the divestiture of our cookies, fruit snacks, pie crusts, and ice-cream cone businesses.~~acquisitions. As a result, we incurred pre-tax charges, primarily related to reorganizations, of $6 $4 million and ~~$19~~$18 million for thethe quarter and year-to-date periodsended October ~~2, 2021,~~1, 2022, respectively. We also recorded pre-tax charges of ~~$23~~$6 million and $19 million for the quarter and year-to-date ~~period~~periods ended ~~September 26, 2020.~~October 2, 2021, respectively.

~~Multi-employer pension plan withdrawal~~Gain related to interest rate swaps

During the ~~second~~third quarter of ~~2020,~~2022, the Company ~~recorded~~recognized a pre-tax gain of ~~approximately $5~~$18 million in interest expense related to ~~the settlement~~a portion of ~~a multi-employer pension plan withdrawal liability.~~certain forward-starting interest rate swaps no longer designated as cash flow hedges due to changes in forecasted debt issuance.

Foreign valuation allowance

During the third quarter of 2021, the Company determined that certain foreign deferred tax assets were no longer more likely than not to be realized in the future and a full valuation allowance of $20 million was recorded.

UK tax rate change

During the second quarter of 2021, the Company recorded tax expense of $23 million as a result of tax legislation enacted in the UK in June 2021, which increased the statutory UK tax rate from 19 percent to 25 percent and required us to re-value our net deferred tax liability related to our UK business to reflect this higher rate.

~~U.S. Tax Reform~~

During the third quarter of 2020, the Company reversed a liability for uncertain tax positions of $32 million, related to the finalization of a tax examination. The liability was related to the Company's estimate of the transition tax liability in conjunction with the finalization of accounting under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act.

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.

Financial results

For the quarter ended October ~~2, 2021,~~1, 2022, our reported net sales increased ~~5.6%~~9.0% versus the prior year onas a result of positive price/mix, ~~across all regions~~sustained momentum in snacks, noodles, and ~~volume~~international cereal as well as a recovery of North America cereal that drove net sales growth ~~in Europe~~which more than offset the impacts of price elasticity and ~~AMEA.~~unfavorable currency. Organic net sales increased ~~5.1%~~13.4% from the prior year excluding foreign currency.

Third quarter reported operating profit ~~increased 9.1%~~decreased 17.6% versus the year-ago quarter ~~due to higher~~as net sales growth was more than offset by unfavorable mark-to-market impact and ~~lapping incremental prior year brand building investment that shifted from the first half of 2020.~~unfavorable foreign currency translation. Currency-neutral

~~Table of Contents~~

adjusted operating profit increased ~~11.2%~~3.7%, after excluding the impact of mark-to-market, ~~business and portfolio realignment,~~separation costs, and foreign currency translation.

Reported diluted EPS of ~~$0.89~~$0.90 for the quarter ~~decreased 12%~~increased 1.0% compared to the prior year quarter of ~~$1.01 due primarily to higher mark-to-market expense and~~$0.89 as a ~~higher~~lower reported effective tax rate and favorable mark-to-market more than offset the impact of separation costs and unfavorable foreign currency translation compared to the prior ~~year.~~ year quarter.Currency-neutral adjusted diluted EPS of ~~$1.07~~$1.06 for the quarter ~~increased 18%~~decreased 2.8% from the prior year quarter ~~on strong operating profit growth,~~ after excluding mark-to-market, separation costs~~business and portfolio realignment, certain Foreign~~, the foreign valuation ~~allowances,~~allowance, and foreign currency translation.

Table of Contents

Reconciliation of certain non-GAAP Financial Measures


		Quarter ended					Year-to-date period ended						Quarter ended					Year-to-date period ended
Consolidated results (dollars in millions, except per share data)	Consolidated results (dollars in millions, except per share data)	October 2, 2021			September 26, 2020		October 2, 2021			September 26, 2020		Consolidated results (dollars in millions, except per share data)	October 1, 2022			October 2, 2021		October 1, 2022			October 2, 2021
Reported net income	Reported net income	$	307		$	348	$	1,055		$	1,046	Reported net income	$	310		$	307	$	1,058		$	1,055
Mark-to-market (pre-tax)	Mark-to-market (pre-tax)	(59)			3		(45)			(71)		Mark-to-market (pre-tax)	(43)			(59)		(69)			(45)

Separation costs (pre-tax)												Separation costs (pre-tax)	(18)			—		(22)			—
Business and portfolio realignment (pre-tax)	Business and portfolio realignment (pre-tax)	(6)			—		(19)			(23)		Business and portfolio realignment (pre-tax)	(4)			(6)		(18)			(19)
Multi-employer pension plan withdrawal (pre-tax)		—			—		—			5
Gain related to interest rate swaps (pre-tax)												Gain related to interest rate swaps (pre-tax)	18			—		18			—

Income tax impact applicable to adjustments, net*	Income tax impact applicable to adjustments, net*	17			(1)		16			22		Income tax impact applicable to adjustments, net*	11			17		22			16
Foreign valuation allowance	Foreign valuation allowance	(20)			—		(20)			—		Foreign valuation allowance	—			(20)		—			(20)
UK tax rate change	UK tax rate change	—			—		(23)			—		UK tax rate change	—			—		—			(23)
U.S. Tax Reform		—			32		—			32

Adjusted net income	Adjusted net income	$	375		$	313	$	1,145		$	1,080	Adjusted net income	$	346		$	375	$	1,127		$	1,145
Foreign currency impact	Foreign currency impact	8			—		40			—		Foreign currency impact	(19)			—		(45)			—
Currency-neutral adjusted net income	Currency-neutral adjusted net income	$	367		$	313	$	1,105		$	1,080	Currency-neutral adjusted net income	$	365		$	375	$	1,173		$	1,145
Reported diluted EPS	Reported diluted EPS	$	0.89		$	1.01	$	3.07		$	3.03	Reported diluted EPS	$	0.90		$	0.89	$	3.09		$	3.07
Mark-to-market (pre-tax)	Mark-to-market (pre-tax)	(0.17)			0.01		(0.13)			(0.21)		Mark-to-market (pre-tax)	(0.13)			(0.17)		(0.20)			(0.13)

Separation costs (pre-tax)												Separation costs (pre-tax)	(0.05)			—		(0.06)			—
Business and portfolio realignment (pre-tax)	Business and portfolio realignment (pre-tax)	(0.02)			—		(0.05)			(0.06)		Business and portfolio realignment (pre-tax)	(0.01)			(0.02)		(0.05)			(0.05)
Multi-employer pension plan withdrawal (pre-tax)		—			—		—			0.01
Gain related to interest rate swaps (pre-tax)												Gain related to interest rate swaps (pre-tax)	0.05			—		0.05			—

Income tax impact applicable to adjustments, net*	Income tax impact applicable to adjustments, net*	0.05			—		0.05			0.07		Income tax impact applicable to adjustments, net*	0.03			0.05		0.06			0.05
Foreign valuation allowance	Foreign valuation allowance	(0.06)			—		(0.06)			—		Foreign valuation allowance	—			(0.06)		—			(0.06)
UK tax rate change	UK tax rate change	—			—		(0.07)			—		UK tax rate change	—			—		—			(0.07)
U.S. Tax Reform		—			0.09		—			0.09

Adjusted diluted EPS	Adjusted diluted EPS	$	1.09		$	0.91	$	3.33		$	3.13	Adjusted diluted EPS	$	1.01		$	1.09	$	3.29		$	3.33
Foreign currency impact	Foreign currency impact	0.02			—		0.11			—		Foreign currency impact	(0.05)			—		(0.13)			—
Currency-neutral adjusted diluted EPS	Currency-neutral adjusted diluted EPS	$	1.07		$	0.91	$	3.22		$	3.13	Currency-neutral adjusted diluted EPS	$	1.06		$	1.09	$	3.42		$	3.33
Currency-neutral adjusted diluted EPS growth	Currency-neutral adjusted diluted EPS growth	17.6		%			2.9		%			Currency-neutral adjusted diluted EPS growth	(2.8)		%			2.7		%

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.

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Net sales and operating profit

The following tables provide an analysis of net sales and operating profit performance for the third quarter of ~~2021~~2022 versus ~~2020:~~2021:


Quarter ended October 2, 2021
Quarter ended October 1, 2022																				Quarter ended October 1, 2022
(millions)	(millions)	North America			Europe			Latin America			AMEA			Corporate			Kellogg Consolidated			(millions)	North America			Europe			Latin America			AMEA			Corporate			Kellogg Consolidated
Reported net sales	Reported net sales	$	2,055		$	631		$	252		$	683		$	—		$	3,622		Reported net sales	$	2,338		$	562		$	283		$	767		$	(3)		$	3,946

Foreign currency impact on total business (inc)/dec		7			14			11			(15)			—			17
Foreign currency impact																				Foreign currency impact	(7)			(86)			(3)			(65)			—			(162)

Organic net sales	Organic net sales	$	2,048		$	617		$	241		$	698		$	—		$	3,604		Organic net sales	$	2,345		$	648		$	286		$	832		$	(3)		$	4,108

Quarter ended September 26, 2020
Quarter ended October 2, 2021																				Quarter ended October 2, 2021
(millions)	(millions)																			(millions)
Reported net sales	Reported net sales	$	2,059		$	552		$	236		$	582		$	—		$	3,429		Reported net sales	$	2,055		$	631		$	252		$	683		$	—		$	3,622

% change - 2021 vs. 2020:
% change - 2022 vs. 2021:																				% change - 2022 vs. 2021:
Reported growth	Reported growth	(0.2)		%	14.3		%	6.7		%	17.4		%	—		%	5.6		%	Reported growth	13.7		%	(10.9)		%	12.6		%	12.2		%	—		%	9.0		%

Foreign currency impact on total business (inc)/dec		0.3		%	2.6		%	4.5		%	(2.6)		%	—		%	0.5		%
Foreign currency impact																				Foreign currency impact	(0.4)		%	(13.6)		%	(1.1)		%	(9.6)		%	—		%	(4.4)		%

Organic growth	Organic growth	(0.5)		%	11.7		%	2.2		%	20.0		%	—		%	5.1		%	Organic growth	14.1		%	2.7		%	13.7		%	21.8		%	—		%	13.4		%
Volume (tonnage)	Volume (tonnage)	(4.5)		%	10.3		%	(2.7)		%	8.6		%	—		%	1.4		%	Volume (tonnage)	1.5		%	(8.2)		%	(4.3)		%	(4.0)		%	—		%	(2.3)		%
Pricing/mix	Pricing/mix	4.0		%	1.4		%	4.9		%	11.4		%	—		%	3.7		%	Pricing/mix	12.6		%	10.9		%	18.0		%	25.8		%	—		%	15.7		%

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.


Quarter ended October 2, 2021
Quarter ended October 1, 2022																				Quarter ended October 1, 2022
(millions)	(millions)	North America			Europe			Latin America			AMEA			Corporate			Kellogg Consolidated			(millions)	North America			Europe			Latin America			AMEA			Corporate			Kellogg Consolidated
Reported operating profit	Reported operating profit	$	328		$	96		$	29		$	60		$	(66)		$	447		Reported operating profit	$	322		$	75		$	28		$	64		$	(120)		$	368
Mark-to-market	Mark-to-market	—			—			1			—			3			4			Mark-to-market	—			—			(1)			—			(58)			(58)

Separation costs																				Separation costs	(18)			—			—			—			—			(18)
Business and portfolio realignment	Business and portfolio realignment	(6)			2			—			—			(1)			(6)			Business and portfolio realignment	(3)			—			—			—			(1)			(4)

Adjusted operating profit	Adjusted operating profit	$	334		$	94		$	28		$	60		$	(67)		$	449		Adjusted operating profit	$	342		$	76		$	29		$	64		$	(62)		$	449
Foreign currency impact	Foreign currency impact	1			3			1			(1)			1			4			Foreign currency impact	(1)			(11)			—			(5)			—			(18)
Currency-neutral adjusted operating profit	Currency-neutral adjusted operating profit	$	333		$	92		$	27		$	62		$	(68)		$	445		Currency-neutral adjusted operating profit	$	343		$	86		$	30		$	69		$	(62)		$	466

Quarter ended September 26, 2020
Quarter ended October 2, 2021																				Quarter ended October 2, 2021
(millions)	(millions)																			(millions)
Reported operating profit	Reported operating profit	$	321		$	62		$	31		$	59		$	(62)		$	411		Reported operating profit	$	328		$	96		$	29		$	60		$	(66)		$	447
Mark-to-market	Mark-to-market	—			—			—			—			10			10			Mark-to-market	—			—			1			—			3			4

Business and portfolio realignment																				Business and portfolio realignment	(6)			2			—			—			(1)			(6)

Adjusted operating profit	Adjusted operating profit	$	321		$	62		$	31		$	59		$	(72)		$	400		Adjusted operating profit	$	334		$	94		$	28		$	60		$	(67)		$	449

% change - 2021 vs. 2020:
% change - 2022 vs. 2021:																				% change - 2022 vs. 2021:
Reported growth	Reported growth	2.1		%	55.1		%	(7.2)		%	3.7		%	(6.0)		%	9.1		%	Reported growth	(1.9)		%	(21.7)		%	(1.2)		%	5.3		%	(82.5)		%	(17.6)		%
Mark-to-market	Mark-to-market	—		%	—		%	3.8		%	—		%	(10.4)		%	(1.6)		%	Mark-to-market	—		%	—		%	(6.7)		%	—		%	(91.0)		%	(13.9)		%

Separation costs																				Separation costs	(5.4)		%	—		%	—		%	—		%	—		%	(3.9)		%
Business and portfolio realignment	Business and portfolio realignment	(2.2)		%	3.9		%	(1.0)		%	0.2		%	(1.8)		%	(1.5)		%	Business and portfolio realignment	1.0		%	(1.9)		%	0.8		%	—		%	1.0		%	0.4		%

Adjusted growth	Adjusted growth	4.3		%	51.2		%	(10.0)		%	3.5		%	6.2		%	12.2		%	Adjusted growth	2.5		%	(19.8)		%	4.7		%	5.3		%	7.5		%	(0.2)		%
Foreign currency impact	Foreign currency impact	0.4		%	4.3		%	3.4		%	(2.3)		%	1.0		%	1.0		%	Foreign currency impact	(0.2)		%	(11.3)		%	(1.7)		%	(8.9)		%	(0.5)		%	(3.9)		%
Currency-neutral adjusted growth	Currency-neutral adjusted growth	3.9		%	46.9		%	(13.4)		%	5.8		%	5.2		%	11.2		%	Currency-neutral adjusted growth	2.7		%	(8.5)		%	6.4		%	14.2		%	8.0		%	3.7		%

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.

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North America

Reported net sales for the third quarter ~~decreased 0.2%~~increased 13.7% versus the prior year due to price/mix growth from revenue growth management as well as volume ~~declined~~growth related to in-market momentum in snacks and North America cereal as ~~a result of supply disruptions~~many brands resumed commercial activities following the first-half inventory replenishment resulting from last year's fire and ~~lapping year-ago growth. Organic net sales decreased 0.5% after excluding the impact of foreign currency.~~strike.


Net sales % change - third quarter 2021 vs. 2020:
Net sales % change - third quarter 2022 vs. 2021:								Net sales % change - third quarter 2022 vs. 2021:
North America	North America	Reported net sales		Foreign currency		Organic net sales		North America	Reported net sales		Foreign currency		Organic net sales
Snacks	Snacks	3.6	%	0.2	%	3.4	%	Snacks	17.9	%	(0.3)	%	18.2	%
Cereal	Cereal	(6.6)	%	0.5	%	(7.1)	%	Cereal	11.4	%	(0.6)	%	12.0	%
Frozen	Frozen	(0.7)	%	0.3	%	(1.0)	%	Frozen	1.3	%	(0.3)	%	1.6	%

North America snacks net sales increased ~~3.6%~~due to both volume and price/mix growth, led by the in-market performance of its largest brands, Cheez-it and Pringles~~, which grew consumption and share during the quarter.~~.

North America cereal net sales ~~decreased 6.6%~~increased due to the faster-than-expected recovery in shipments and share~~North America frozen foods net sales decreased 0.7%~~ in our U.S. cereal business following the 2021 fire and strike. ~~during the quarter as they lapped strong prior year pandemic-related growth and current quarter supply constraints.~~

North America frozen grew net sales during the third quarter, led by Eggo, where we installed much-needed capacity during the second quarter. This more than offset declines in our MorningStar Farms, plant‐based business, where we continue to experience supply disruption at a co‐manufacturer.

North America operating profit ~~increased 2.1%~~decreased 1.9% primarily due to ~~lapping incremental prior year brand investment~~ net sales growth that ~~shifted from the first half of 2020 partially~~was more than offset by ~~inflation as a result of shortages in materials, freight, and labor.~~higher one-time charges. Currency-neutral adjusted operating profit increased ~~3.9%~~2.7%, after excluding the impact of business and portfolio ~~realignment.~~realignment and separation costs.

Europe

Reported net sales ~~increased 14% benefiting from higher volume~~decreased 10.9% as unfavorable foreign currency and the impact of suspending shipments into Russia more than offset favorable price/mix ~~due to growth~~and in-market momentum in ~~both cereal and snacks, led by the UK and Russia.~~snacks. Organic net sales increased ~~12%~~2.7% after excluding the impact of foreign currency.

~~Cereal net sales growth for the quarter was led by the UK and supported by overall regional share gains.~~

Snacks net sales growth was broad-based across the region led by Pringles ~~continued outpacing of category growth.~~.

Cereal net sales declined for the quarter on an as reported basis due to unfavorable foreign currency.

Reported operating profit ~~increased 55%~~decreased 21.7% due primarily to ~~higher net sales~~unfavorable foreign currency and lapping ~~incremental brand investment that shifted from the first half of 2020.~~an exceptional prior year quarter. Currency-neutral adjusted operating profit ~~increased 47%~~decreased 8.5% after excluding the impact of foreign currency.

Latin America

Reported net sales increased ~~6.7% due primarily to broad-based~~12.6%, as price/mix growth and in-market momentum in snacks and cereal across the region ~~led by snacks, and favorable foreign currency translation.~~more than offset lower volume. Organic net sales increased ~~2.2%~~13.7%, after excluding the impact of foreign currency.

Snacks net sales declined primarily due to unfavorable foreign currency.

Cereal net sales increased despite unfavorable foreign currency.

Reported operating profit decreased ~~7.2%~~1.2% due to ~~primarily to~~higher net sales and favorable mark-to-market impacts were more than offset by input cost inflation and ~~supply chain challenges and lapping strong prior year growth aided by the pandemic, partially offset by favorable~~unfavorable foreign currency ~~translation~~. Currency-neutral adjusted operating profit ~~decreased 13%~~increased 6.4% after excluding the impact of mark-to-market, and foreign currency.

AMEA

Reported net sales increased ~~17%~~12.2%, as price/mix growth more than offset a decline in volume and ~~organic~~unfavorable foreign currency. Organic net sales increased ~~20%~~21.8% after excluding the impact of foreign currency. ~~This growth was due to both volume and price-mix, led by Africa, as well as growth in cereal in Australia and Asia, partially offset by the impact of COVID-related production restrictions on~~ ~~Pringles~~ ~~during the quarter.~~

Reported operating profit increased 4% due primarily to higher net sales, lower business and portfolio realignment charges, and favorable foreign currency partially offset by cost inflation. Currency-neutral adjusted operating profit increased 6%, after excluding the impact of foreign currency and business and portfolio realignment.

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Growth was led by snacks, noodles and other, while cereal declined slightly due to unfavorable foreign currency.

Reported operating profit increased 5.3% as the impact of higher net sales were partially offset by cost inflation and unfavorable foreign currency. Currency-neutral adjusted operating profit increased 14.2%, after excluding the impact of foreign currency.

Corporate

Reported operating profit decreased $4$54 million versus the comparable prior year quarter due primarily to unfavorable mark-to-market impacts. Currency-neutral adjusted operating profit increased $4$5 million from the prior year after excluding mark-to-market.

~~Table of Contents~~

The following tables provide an analysis of net sales and operating profit performance for the year-to-date periods ended October 1, 2022 versus October 2, ~~2021 versus September 26, 2020:~~2021:


Year-to-date period ended October 2, 2021
Year-to-date period ended October 1, 2022																				Year-to-date period ended October 1, 2022
(millions)	(millions)	North America			Europe			Latin America			AMEA			Corporate			Kellogg Consolidated			(millions)	North America			Europe			Latin America			AMEA			Corporate			Kellogg Consolidated
Reported net sales	Reported net sales	$	6,199		$	1,827		$	753		$	1,981		$	—		$	10,761		Reported net sales	$	6,696		$	1,749		$	826		$	2,217		$	(6)		$	11,482

Foreign currency impact on total business (inc)/dec		33			105			21			(10)			—			149
Foreign currency impact																				Foreign currency impact	(15)			(189)			1			(145)			—			(348)

Organic net sales	Organic net sales	$	6,166		$	1,722		$	733		$	1,992		$	—		$	10,612		Organic net sales	$	6,711		$	1,938		$	826		$	2,362		$	(6)		$	11,831

Year-to-date period ended September 26, 2020
Year-to-date period ended October 2, 2021																				Year-to-date period ended October 2, 2021
(millions)	(millions)																			(millions)
Reported net sales	Reported net sales	$	6,323		$	1,624		$	686		$	1,673		$	—		$	10,306		Reported net sales	$	6,199		$	1,827		$	753		$	1,981		$	—		$	10,761

% change - 2021 vs. 2020:
% change - 2022 vs. 2021:																				% change - 2022 vs. 2021:
Reported growth	Reported growth	(2.0)		%	12.5		%	9.9		%	18.4		%	—		%	4.4		%	Reported growth	8.1		%	(4.3)		%	9.7		%	11.9		%	—		%	6.7		%

Foreign currency impact on total business (inc)/dec		0.5		%	6.5		%	3.0		%	(0.6)		%	—		%	1.4		%
Foreign currency impact																				Foreign currency impact	(0.2)		%	(10.4)		%	0.1		%	(7.3)		%	—		%	(3.2)		%

Organic growth	Organic growth	(2.5)		%	6.0		%	6.9		%	19.0		%	—		%	3.0		%	Organic growth	8.3		%	6.1		%	9.6		%	19.2		%	—		%	9.9		%
Volume (tonnage)	Volume (tonnage)	(6.1)		%	2.0		%	0.3		%	5.3		%	—		%	(1.3)		%	Volume (tonnage)	(1.9)		%	(4.2)		%	(5.4)		%	(3.8)		%	—		%	(3.2)		%
Pricing/mix	Pricing/mix	3.6		%	4.0		%	6.6		%	13.7		%	—		%	4.3		%	Pricing/mix	10.2		%	10.3		%	15.0		%	23.0		%	—		%	13.1		%

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.

Year-to-date period ended October 2, 2021
(millions) North
America Europe Latin
America AMEA Corporate Kellogg
Consolidated
Reported operating profit $ 1,070 $ 277 $ 87 $ 186 $ (198) $ 1,423
Mark-to-market — — 1 — (2) (2)
Business and portfolio realignment (12) 2 (4) — (4) (19)
Adjusted operating profit $ 1,082 $ 275 $ 91 $ 186 $ (191) $ 1,443
Foreign currency impact 5 17 3 4 2 31
Currency-neutral adjusted operating profit $ 1,078 $ 258 $ 87 $ 182 $ (193) $ 1,413
Year-to-date period ended September 26, 2020
(millions)
Reported operating profit $ 1,151 $ 224 $ 84 $ 142 $ (225) $ 1,376
Mark-to-market — — — — (7) (7)
Business and portfolio realignment 1 (3) (4) (12) (4) (23)
Multi-employer pension plan exit liability 5 — — — — 5
Adjusted operating profit $ 1,145 $ 227 $ 88 $ 155 $ (214) $ 1,401
% change - 2021 vs. 2020:
Reported growth (7.0) % 23.9 % 4.0 % 30.7 % 12.3 % 3.4 %
Mark-to-market — % — % 0.8 % — % 1.9 % 0.4 %
Business and portfolio realignment (1.1) % 2.4 % 0.3 % 10.4 % (0.2) % 0.3 %
Multi-employer pension plan withdrawal (0.4) % — % — % — % — % (0.3) %
Adjusted growth (5.5) % 21.5 % 2.9 % 20.3 % 10.6 % 3.0 %
Foreign currency impact 0.4 % 7.5 % 3.7 % 2.6 % 0.9 % 2.2 %
Currency-neutral adjusted growth (5.9) % 14.0 % (0.8) % 17.7 % 9.7 % 0.8 %

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Year-to-date period ended October 1, 2022
(millions)	North America			Europe			Latin America			AMEA			Corporate			Kellogg Consolidated
Reported operating profit	$	1,043		$	280		$	82		$	192		$	(296)		$	1,300
Mark-to-market	—			—			(2)			—			(113)			(114)

Separation costs	(22)			—			—			—			—			(22)
Business and portfolio realignment	(15)			—			—			—			(2)			(18)

Adjusted operating profit	$	1,080		$	280		$	84		$	192		$	(182)		$	1,454
Foreign currency impact	(2)			(27)			(2)			(12)			(1)			(43)
Currency-neutral adjusted operating profit	$	1,082		$	307		$	86		$	204		$	(181)		$	1,497







Year-to-date period ended October 2, 2021
(millions)
Reported operating profit	$	1,070		$	277		$	87		$	186		$	(198)		$	1,423
Mark-to-market	—			—			1			—			(2)			(2)


Business and portfolio realignment	(12)			2			(4)			—			(4)			(19)

Adjusted operating profit	$	1,082		$	275		$	91		$	186		$	(191)		$	1,443









% change - 2022 vs. 2021:
Reported growth	(2.5)		%	0.8		%	(6.3)		%	3.1		%	(49.6)		%	(8.6)		%
Mark-to-market	—		%	—		%	(2.4)		%	—		%	(55.8)		%	(7.9)		%

Separation costs	(2.0)		%	—		%	—		%	—		%	—		%	(1.5)		%
Business and portfolio realignment	(0.3)		%	(0.8)		%	4.0		%	0.1		%	1.2		%	0.1		%

Adjusted growth	(0.2)		%	1.6		%	(7.9)		%	3.0		%	5.0		%	0.7		%
Foreign currency impact	(0.1)		%	(9.7)		%	(2.3)		%	(6.7)		%	(0.3)		%	(3.0)		%
Currency-neutral adjusted growth	(0.1)		%	11.3		%	(5.6)		%	9.7		%	5.3		%	3.7		%

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~~

North America

Reported net sales for the year-to-date period ~~decreased 2.0%~~increased 8.1% versus the prior year ~~lapping elevated demand for packaged foods consumed at home~~as price/mix and momentum in snacks more than offset the negative sales and cost impact of recovering inventories in North America cereal following last year’s fire and strike during the ~~early stages of the pandemic last year.~~first half. Organic net sales ~~decreased 2.5%~~increased 8.3% after excluding the impact of foreign currency.


Net sales % change - third quarter year-to-date 2021 vs. 2020:
Net sales % change - third quarter year-to-date 2022 vs. 2021:								Net sales % change - third quarter year-to-date 2022 vs. 2021:
North America	North America	Reported net sales		Foreign currency		Organic net sales		North America	Reported net sales		Foreign currency		Organic net sales
Snacks	Snacks	3.0	%	0.4	%	2.6	%	Snacks	13.5	%	(0.2)	%	13.7	%
Cereal	Cereal	(10.0)	%	0.8	%	(10.8)	%	Cereal	2.5	%	(0.4)	%	2.9	%
Frozen	Frozen	(2.0)	%	0.4	%	(2.4)	%	Frozen	(1.7)	%	(0.2)	%	(1.5)	%

North America snacks net sales increased ~~3.0%~~ led by the performance of its largest brands, Cheez-it and Pringles, which both grew consumption ~~and share~~ during the year-to-date period.

North America cereal net sales ~~decreased 10%~~increased due to the faster-than-expected recovery in shipments and share in our U.S. cereal business following the 2021 fire and strike.

North America frozen ~~foods~~ net sales decreased ~~2.0%~~ during the year-to-date period ~~as they lapped strong prior year pandemic-related growth and~~primarily due to current period supply constraints.

North America operating profit decreased ~~7.0%~~2.5% compared to the prior year due to ~~lower net sales~~input and ~~input~~logistics cost inflation and ~~incremental costs and inefficiencies related to broader shortages.~~cost impact of rebuilding inventories in U.S. cereal more than offset favorable price/mix. Currency-neutral adjusted operating profit decreased ~~5.9%~~0.1%, after excluding the impact of separation costs and business and portfolio realignment.

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Europe

Reported net sales ~~increased 12.5% due to~~decreased 4.3% as growth in snacks ~~as well as favorable~~and positive price/mix was more than offset by unfavorable foreign currency translation. Organic net sales increased ~~6.0%~~6.1% after excluding the impact of foreign currency.

Cereal net sales ~~growth~~declined for the year-to-date period ~~was driven by favorable~~on an as reported basis due to unfavorable foreign ~~currency translation offset by lapping~~ ~~a pandemic-related surge in consumption growth during the prior year~~.currency.

Snacks net sales growth was led by sustained momentum in Pringles, driven by innovation, effective advertising, and successful consumer promotions.

Reported operating profit increased ~~24% due primarily to higher net sales and favorable~~0.8% despite unfavorable foreign ~~currency translation partially offset by lapping unusually high operating leverage and postponement of brand investment during the onset of the pandemic.~~currency. Currency-neutral adjusted operating profit increased ~~14%~~11.3% after excluding the impact of foreign currency ~~and business and portfolio realignment.~~translation.

Latin America

Reported net sales increased ~~10%~~9.7% due primarily to ~~broad-based~~ growth in snacks across the region ~~led by snacks,~~ and favorable ~~foreign currency translation.~~price/mix. Organic net sales increased ~~6.9%~~9.6%, after excluding the impact of foreign currency.

Reported operating profit ~~increased 4.0%~~decreased 6.3% due to ~~favorable~~unfavorable foreign currency translation ~~partially offset by~~and input cost inflation. Currency-neutral adjusted operating profit decreased ~~0.8%~~5.6% after excluding the impact of mark-to-market, business and portfolio realignment costs, and foreign currency.

AMEA

Reported net sales increased ~~18%~~11.9% due to broad-based growth across the region and categories resulting from favorable price/mix and ~~higher volume.~~net sales momentum in snacks. Organic net sales also increased ~~19%~~19.2%.

Noodles and other net sales increased lead by strong growth from Multipro as well as our Kellogg's branded noodles business.

Snacks net sales increased due primarily to strong growth in Pringles across the region.

Cereal net sales growth was driven by broad-based growth across Asia and Australia.

~~Table of Contents~~

Reported operating profit increased ~~31%~~3.1% due primarily to ~~operating leverage from~~ higher net sales partially offset by higher input costs and ~~the lapping of prior year business and portfolio realignment charges.~~unfavorable foreign currency. Currency-neutral adjusted operating profit increased ~~18%~~9.7%, after excluding the impact of ~~business and portfolio realignment, and~~ foreign currency.

Corporate

Reported operating profit ~~increased $27~~decreased $98 million versus the comparable prior year period due primarily to ~~favorable~~unfavorable mark-to-market ~~impact and lower incentive compensation expense~~impacts. Currency-neutral adjusted operating profit increased ~~$21~~$10 million from the prior year after excluding the impact of mark-to-market.

Margin performance

Our currency-neutral adjusted gross profit and gross profit margin performance for the quarter ended October 1, 2022 and October 2, 2021 ~~and September 26, 2020~~ are reconciled to the directly comparable GAAP measures as follows:


Quarter ended	Quarter ended	October 2, 2021				September 26, 2020				GM change vs. prior year (pts.)	Quarter ended	October 1, 2022				October 2, 2021				GM change vs. prior year (pts.)
(dollars in millions)	(dollars in millions)	Gross Profit (a)		Gross Margin (b)		Gross Profit (a)		Gross Margin (b)			(dollars in millions)	Gross Profit (a)		Gross Margin (b)		Gross Profit (a)		Gross Margin (b)
Reported	Reported	$	1,165	32.1	%	$	1,200	35.0	%	(2.9)	Reported	$	1,153	29.2	%	$	1,165	32.1	%	(2.9)
Mark-to-market	Mark-to-market	4		0.1	%	11		0.3	%	(0.2)	Mark-to-market	(60)		(1.5)	%	4		0.1	%	(1.6)

Business and portfolio realignment	Business and portfolio realignment	(6)		(0.2)	%	—		—	%	(0.2)	Business and portfolio realignment	(2)		(0.1)	%	(6)		(0.2)	%	0.1
Multi-employer pension plan withdrawal		—		—	%	—		—	%	—

Adjusted	Adjusted	1,167		32.2	%	1,189		34.7	%	(2.5)	Adjusted	1,215		30.8	%	1,167		32.2	%	(1.4)
Foreign currency impact	Foreign currency impact	9		0.1	%	—		—	%	0.1	Foreign currency impact	(47)		0.1	%	—		—	%	0.1
Currency-neutral adjusted	Currency-neutral adjusted	$	1,157	32.1	%	$	1,189	34.7	%	(2.6)	Currency-neutral adjusted	$	1,262	30.7	%	$	1,167	32.2	%	(1.5)

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.

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Reported gross margin for the quarter decreased 290 basis points versus the prior year due primarily to unfavorable mark-to-market, cost inflation, and a mix shift towards emerging markets, which more than offset the impact of productivity and revenue growth management initiatives. Currency-neutral adjusted gross margin decreased 150 basis points compared to the second quarter of 2021 after eliminating the impact of mark-to-market and foreign currency.

Our currency-neutral adjusted gross profit and gross profit margin performance for the year-to-date periods ended October 1, 2022 and October 2, 2021 are reconciled to the directly comparable GAAP measures as follows:



Year-to-date period ended	October 1, 2022				October 2, 2021				GM change vs. prior year (pts.)
(dollars in millions)	Gross Profit (a)		Gross Margin (b)		Gross Profit (a)		Gross Margin (b)
Reported	$	3,455	30.1	%	$	3,554	33.0	%	(2.9)
Mark-to-market	(120)		(1.0)	%	(9)		(0.1)	%	(0.9)


Business and portfolio realignment	(9)		(0.1)	%	(8)		(0.1)	%	—

Adjusted	3,584		31.2	%	3,571		33.2	%	(2.0)
Foreign currency impact	(105)		—	%	—		—	%	—
Currency-neutral adjusted	$	3,689	31.2	%	$	3,571	33.2	%	(2.0)

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~~year-to-date period decreased 290 basis points versus the prior year asdue primarily to unfavorable mark-to-market, the residual impact of last year's fire and strike in our U.S. cereal plants, cost inflation, and a mix shift towards emerging markets, ~~and lapping substantial operating leverage in the prior year quarter,~~which more than offset the impact of productivity ~~improvements~~ and ~~price realization.~~revenue growth management initiatives. Currency-neutral adjusted gross margin decreased ~~260~~200 basis points compared to ~~the third quarter of 2020~~2021 after eliminating the impact of mark-to-market, business and portfolio realignment, and foreign currency.

Our currency-neutral adjusted gross profit and gross profit margin performance for the year-to-date periods ended October 2, 2021 and September 26, 2020 are reconciled to the directly comparable GAAP measures as follows:

Year-to-date period ended October 2, 2021 September 26, 2020 GM change vs. prior
year (pts.)
(dollars in millions) Gross Profit (a) Gross Margin (b) Gross Profit (a) Gross Margin (b)
Reported $ 3,554 33.0 % $ 3,542 34.4 % (1.4)
Mark-to-market (9) (0.1) % (10) (0.1) % —
Business and portfolio realignment (8) (0.1) % (4) — % (0.1)
Multi-employer pension plan withdrawal — — % $ 5 — % —
Adjusted 3,571 33.2 % 3,551 34.5 % (1.3)
Foreign currency impact 65 0.2 % — — % 0.2
Currency-neutral adjusted $ 3,506 33.0 % $ 3,551 34.5 % (1.5)

~~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.~~

~~Table of Contents~~

~~Reported gross margin for the year-to-date period decreased 140 basis points versus the prior year as the impact of~~ productivity improvements and price realization was more than offset by cost inflation, a mix shift towards emerging markets, and lapping substantial operating leverage in the prior year-to-date period when our plants were running limited SKUs at maximum capacity due to the acceleration of demand as a result of the pandemic. ~~Currency-neutral adjusted gross margin decreased 150 basis points compared to 2020.~~

~~Restructuring Programs~~

We view our restructuring programs as part of our operating principles to provide greater visibility in achieving our long-term profit growth targets. Initiatives undertaken are currently expected to recover cash implementation costs within a 3 to 5-year period subsequent to 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.

During the third quarter of 2021, the Company announced a reconfiguration of the North America reportable segment supply chain network, designed to drive increased productivity. The project is expected to be substantially completed by early 2024, with related productivity improvements commencing in 2023. The overall project is expected to result in cumulative pretax charges of approximately $45 million, which include employee-related costs of $4 million, other cash costs of $21 million and non-cash costs, primarily consisting of accelerated depreciation and asset write-off's, of $20 million. Charges incurred related to this restructuring program were $4 million during the quarter and year-to-date periods ended October 2, 2021. These charges primarily related to severance costs, and were recorded in COGS expense.

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

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, primarily in the euro, British pound, ~~Mexican peso,~~ Australian dollar, Canadian dollar, Mexican peso, Brazilian Real, Nigerian Naira, Russian ruble, 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 significant impact on our results if such increase or decrease in the value of the U.S. dollar is substantial.

Interest expense

For the quarters ended October 1, 2022 and October 2, 2021, ~~and September 26, 2020,~~ interest expense was ~~$55~~$39 million and ~~$63~~$55 million, respectively. For the year-to-date periods ended October 1, 2022 and October 2, 2021, ~~and September 26, 2020,~~ interest expense was ~~$172~~$149 million and ~~$196~~$172 million, respectively. The decrease from the prior year quarter is due primarily to an $18 million gain related to a portion of certain forward-starting interest rate swaps no longer designated as cash flow hedges due to changes in forecasted debt issuance. The decrease in interest expense for the year-to-date period also included the impact of lower average outstanding debt compared to the prior year as a result of the debt ~~redemptions~~redemption in ~~December 2020 and~~ May 2021.

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Income Taxes

Our reported effective tax rate for the quarters ended October 1, 2022 and October 2, 2021 was 19% and ~~September 26, 2020 was~~ 24% ~~and 16%~~, respectively. Our reported effective tax rate for the year-to-date periods ended October 1, 2022 and October 2, 2021 was 21% and ~~September 26, 2020 was~~ 25% ~~and 20%~~, respectively. The lower effective tax rate for the quarter and year-to-date periods ended October 1, 2022, ~~October 2,~~compared to the same periods in 2021,, was ~~unfavorably~~ ~~impacted by the establishment of~~due to a full valuation allowance of $20 million related to certain foreign deferred tax assets. During the quarter, the Company determined that certain foreign deferred tax assets were no longer more likely than not to be realizedprior year increase in the ~~future~~UK tax rate and a ~~full~~prior year valuation ~~allowance was recorded on a discrete period basis.~~ ~~The effective tax rate for the year-to-date period ended October 2, 2021, was unfavorably impacted by the aforementioned valuation allowance as well as tax legislation in the UK.~~allowance. During the second quarter of 2021, the Company recorded discrete tax expense of $23 million as a result of tax legislation enacted in the UK in June 2021, which increased the statutory UK tax rate from 19 percent to 25 percent for tax periods after April 1, 2023. The Company revalued its net deferred tax balances related to the UK business to reflect the increased tax rate.

~~The~~Our adjusted effective tax rate for the quarters ended October ~~2, 2021~~1, 2022 and ~~September 26, 2020~~October 2, 2021 was 20% and 23%20%, respectively. ~~The~~Our adjusted effective tax rate for the year-to-date periods ended October 1, 2022 and October 2, 2021 was 21% and ~~September 26, 2020 was~~ 22% ~~and 23%~~, respectively.

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						Year-to-date period ended							Quarter ended						Year-to-date period ended
Consolidated results (dollars in millions)	Consolidated results (dollars in millions)	October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020			Consolidated results (dollars in millions)	October 1, 2022			October 2, 2021			October 1, 2022			October 2, 2021
Reported income taxes	Reported income taxes	$	92		$	65		$	345		$	268		Reported income taxes	$	74		$	92		$	283		$	345
Mark-to-market	Mark-to-market	(16)			1			(12)			(19)			Mark-to-market	(11)			(16)			(16)			(12)

Separation costs														Separation costs	(4)			—			(5)			—
Business and portfolio realignment	Business and portfolio realignment	(1)			—			(5)			(4)			Business and portfolio realignment	—			(1)			(6)			(5)
Multi-employer pension plan withdrawal		—			—			—			1
Gain related to interest rate swaps														Gain related to interest rate swaps	5			—			5			—

Foreign valuation allowance	Foreign valuation allowance	20			—			20			—			Foreign valuation allowance	—			20			—			20
UK tax rate change	UK tax rate change	—			—			23			—			UK tax rate change	—			—			—			23
U.S. Tax Reform		—			(32)			—			(32)

Adjusted income taxes	Adjusted income taxes	$	89		$	97		$	318		$	323		Adjusted income taxes	$	85		$	89		$	305		$	318

Reported effective income tax rate	Reported effective income tax rate	23.5		%	15.6		%	24.5		%	20.1		%	Reported effective income tax rate	19.2		%	23.5		%	21.1		%	24.5		%
Mark-to-market	Mark-to-market	(0.4)		%	—		%	(0.1)		%	(0.3)		%	Mark-to-market	(0.7)		%	(0.4)		%	(0.1)		%	(0.1)		%

Separation costs														Separation costs	(0.2)		%	—		%	(0.1)		%	—		%
Business and portfolio realignment	Business and portfolio realignment	(0.1)		%	—		%	—		%	—		%	Business and portfolio realignment	—		%	(0.1)		%	(0.1)		%	—		%
Multi-employer pension plan withdrawal		—		%	—		%	—		%	—		%
Gain related to interest rate swaps														Gain related to interest rate swaps	0.3		%	—		%	0.1		%	—		%

Foreign valuation allowance	Foreign valuation allowance	4.4		%	—		%	1.4		%	—		%	Foreign valuation allowance	—		%	4.4		%	—		%	1.4		%
UK tax rate change	UK tax rate change	—		%	—		%	1.6		%	—		%	UK tax rate change	—		%	—		%	—		%	1.6		%
U.S. Tax Reform		—		%	(7.8)		%	—		%	(2.3)		%

Adjusted effective income tax rate	Adjusted effective income tax rate	19.5		%	23.3		%	21.6		%	22.7		%	Adjusted effective income tax rate	19.7		%	19.5		%	21.3		%	21.6		%

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.

Liquidity and capital resources

At this time, the COVID-19 pandemic has not materially impacted our liquidity and 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 cash provided by operating activities of ~~$1.6-$1.7~~approximately $1.7 billion and capital expenditures of approximately $500 million in ~~2021.~~2022. We currently have $2.5 billion of unused revolving credit agreements, including $1.5 billion effective through ~~2023~~2026 and $1.0 billion effective through ~~January~~December 2022, 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. We continue to utilize available capacity within the Monetization Programs to maintain financial flexibility without negatively impacting working capital.

As the impact of COVID-19 on the economy and our operations evolves, we will continue to assess our liquidity needs. 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.

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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 the timing of payment of our trade payables. The impacts of the extended customer terms program and the monetization programs on core working capital are largely offsetting. These programs are all part of our ongoing working capital management.

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 ~~2020,~~2021, and are not expected to have a material impact in ~~2021.~~2022.

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 ~~$1.2~~$1.6 billion and ~~$1.3~~$1.9 billion as of October ~~2, 2021~~1, 2022 and ~~September 26, 2020,~~January 1, 2022, respectively.

The following table reflects net debt amounts:


(millions, unaudited)	(millions, unaudited)	October 2, 2021		January 2, 2021		(millions, unaudited)	October 1, 2022		January 1, 2022
Notes payable	Notes payable	$	497	$	102	Notes payable	$	174	$	137
Current maturities of long-term debt	Current maturities of long-term debt	16		627		Current maturities of long-term debt	816		712
Long-term debt	Long-term debt	7,020		6,746		Long-term debt	5,697		6,262
Total debt liabilities	Total debt liabilities	$	7,533	$	7,475	Total debt liabilities	$	6,687	$	7,111
Less:	Less:					Less:
Cash and cash equivalents	Cash and cash equivalents	(440)		(435)		Cash and cash equivalents	(373)		(286)

Net debt	Net debt	$	7,093	$	7,040	Net debt	$	6,314	$	6,825

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


		Year-to-date period ended					Year-to-date period ended
(millions)	(millions)	October 2, 2021		September 26, 2020		(millions)	October 1, 2022		October 2, 2021
Net cash provided by (used in):	Net cash provided by (used in):					Net cash provided by (used in):
Operating activities	Operating activities	$	1,145	$	1,593	Operating activities	1,180		$	1,145
Investing activities	Investing activities	(385)		(649)		Investing activities	(312)		(385)
Financing activities	Financing activities	(740)		21		Financing activities	(665)		(740)
Effect of exchange rates on cash and cash equivalents	Effect of exchange rates on cash and cash equivalents	(15)		(33)		Effect of exchange rates on cash and cash equivalents	(116)		(15)
Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	$	5	$	932	Net increase (decrease) in cash and cash equivalents	$	87	$	5

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 ended October ~~2, 2021,~~1, 2022, totaled ~~$1,145~~$1,180 million compared to ~~$1,593~~$1,145 million in the prior year period. The ~~decrease~~increase is due primarily to ~~higher year-over-year income tax payments and~~ changes in incentive compensation and other accruals ~~during~~compared to the ~~period.~~

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prior year partially offset by cash outflow related to core working capital.

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 approximately negative 98 days and negative 109 days for the 12 month periods ended October 1, 2022 and October 2, 2021, ~~and September 26, 2020,~~ respectively.

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


		Year-to-date period ended					Year-to-date period ended
(millions)	(millions)	October 2, 2021		September 26, 2020		(millions)	October 1, 2022		October 2, 2021
Net cash provided by operating activities	Net cash provided by operating activities	$	1,145	$	1,593	Net cash provided by operating activities	$	1,180	$	1,145
Additions to properties	Additions to properties	(408)		(326)		Additions to properties	(350)		(408)
Cash flow	Cash flow	$	737	$	1,267	Cash flow	$	830	$	737

Our non-GAAP measure for cash flow ~~declined~~increased to ~~$737~~$830 million in the year-to-date period ended October ~~2, 2021,~~1, 2022, from ~~$1,267~~$737 million in the prior year ~~period~~ due primarily to ~~higher~~lower capital expenditures ~~as projects were delayed in the prior year due to the pandemic, and higher year-over-year income tax payments~~ and changes in incentive compensation and other ~~accruals from the prior period.~~accruals.

Investing activities

Our net cash used in investing activities totaled ~~$385~~$312 million for the ~~year-to-date period~~quarter ended October ~~2, 2021~~1, 2022 compared to ~~$649~~$385 million in the comparable prior year ~~period. The impact of cash outflow from the purchase of securities in the prior year~~ period ~~was partially offset by higher~~due primarily to lower capital ~~expenditures during the current period.~~expenditures.

Financing activities

Our net cash used in financing activities for the quarter ended October ~~2, 2021~~1, 2022 totaled ~~$740~~$665 million compared to cash ~~provided~~used of ~~$21~~$740 million during the comparable prior year period. The year-over-year variance was driven by ~~the repayment of €500 million, seven-year 1.75% Euro Notes upon maturity~~an increase in ~~May 2021 and~~net proceeds from stock issued related to stock-based compensation, partially offset by the repurchase of ~~$240~~$300 million of our common stock during the current year ~~partially offset by~~versus $240 million in the ~~May 2021 issuance of €300 million eight-year 0.50% Euro Notes due 2029.~~prior year period.

In February 2020, the board of directors approved an authorization to repurchase up to $1.5 billion of the Company's common stock through December 2022. The authorization is intended to allow us to repurchase shares for general corporate purposes and to offset issuances for employee benefit programs. Total purchases for the year-to-date period ended October 1, 2022, were 5 million shares for $300 million. Total purchases for the year-to-date period ended October 2, 2021, were 4 million shares for $240 million. ~~The Company did not purchase shares in the year-to-date period ended September 26, 2020.~~

We paid cash dividends of ~~$590~~$596 million in the year-to-date period ended October ~~2, 2021,~~1, 2022, compared to ~~$586~~$590 million during the comparable prior year period. In October ~~2021,~~2022, the board of directors declared a dividend of ~~$.58~~$.59 per common share, payable on December 15, ~~2021~~2022 to shareholders of record at the close of business on December 1, ~~2021.~~2022.

We ~~entered into an unsecured~~continue to maintain both a Five-Year ~~Credit Agreement in January 2018, allowing us to borrow, on~~and a ~~revolving credit basis, up to $1.5 billion and expiring in January 2023.~~

~~In January 2021, we entered into an unsecured~~ 364-Day Credit Agreement, ~~to borrow, on a revolving credit basis, up to $1.0 billion at any time outstanding, to replace the $1.0 billion 364-day facility that expired in January 2021.~~

~~The Five-Year and 364 Day Credit Agreements,~~ which had no outstanding borrowings as of October ~~2, 2021,~~1, 2022, 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 agents may terminate the commitments under the credit facilities, accelerate any outstanding loans under the 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

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control provision. There are no significant restrictions on the payment of dividends. We were in compliance with all covenants as of October ~~2, 2021.~~1, 2022.

The Notes do not contain acceleration of maturity clauses that are dependent on credit ratings. A change in our credit ratings could limit our access to the U.S. short-term debt market and/or increase the cost of refinancing long-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 ~~January~~December 2022, as well as our Five-Year Credit Agreement, which expires in ~~January 2023.~~December 2026. This source of liquidity is unused and available on an unsecured basis, although we do not currently plan to use it.

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Monetization and ~~Accounts Payable programs~~Supplier Finance Programs

We have a program in which customers could extend their payment terms in exchange for the elimination of early payment discounts (Extended Terms Program). In order to mitigate the net working capital impact of the Extended Terms Program for discrete customers, we entered into agreements to sell, on a revolving basis, certain trade accounts receivable balances to third party financial institutions (Monetization Programs). Transfers under the Monetization Programs are accounted for as sales of receivables resulting in the receivables being de-recognized from our Consolidated Balance Sheet. The Monetization Programs provide for the continuing sale of certain receivables on a revolving basis until terminated by either party; however the maximum funding from receivables that may be sold at any time is currently approximately ~~$1.1 billion,~~$745 million, but may be increased or decreased as customers move in or out of the Extended Terms Program and as additional financial institutions move in or out of the Monetization Programs. During 2022, we reduced the funding capacity under the program from $1.1 billion to $745 million as a result of reduced utilization of the Extended Terms Program by certain customers. Accounts receivable sold of ~~$611~~$632 million and ~~$783~~$549 million remained outstanding under this arrangement as of October ~~2, 2021~~1, 2022 and January ~~2, 2021,~~1, 2022, respectively.

The Monetization Programs are designed to directly offset the impact 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. Current DSO levels within North America are consistent with DSO levels prior to the execution of the Extended Term Program and Monetization Programs.

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

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, however, we do not expect supplier payment term modifications to have a material impact on our cash flows during ~~2021.~~2022.

We have agreements with third parties ~~(Accounts Payable Program)~~(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 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. Our goal is to capture overall supplier savings, in the form of payment terms or vendor funding, and the agreements facilitate the suppliers’ ability to sell payment obligations, while providing them with greater working capital flexibility. We have no economic interest in the sale of these suppliers’ receivables and no direct financial relationship with the financial institutions concerning these services. 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 suppliers against payment obligations is restricted by the agreements for those payment obligations that have been sold by suppliers.

Refer to 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 Monetization Programs and we are not able to 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 ~~Accounts Payable~~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 we were unable to secure alternative programs, we may have to utilize our various financing arrangements for short-term liquidity or increase our long-term borrowings.

Accounting standards to be adopted in future periods

Supplier Finance Programs: Disclosure of Supplier Finance Program Obligations. In September 2022, the FASB issued an ASU to improve the disclosures of supplier finance programs. Specifically, the ASU requires disclosure of key terms of the supplier finance programs and a rollforward of the related obligations. The amendments in this ASU do not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance programs. The ASU is effective for fiscal years, and interim periods within those years, beginning after

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December 15, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company has historically presented information regarding the nature and amount of outstanding Accounts Payable obligations confirmed into supplier finance programs within Note 1 of the financial statements. The Company is currently assessing the impact of any incremental disclosures required by this ASU and the planned timing of adoption.

Future outlook

Reflecting its strong year-to-date results, underlying trends, and confidence in its outlook, Kellogg Company ~~affirmed~~has updated its full-year financial guidance on operating profit, earnings per share and cash flow, as an improved outlook for net sales is offset by the impact of industry-wide supply chain challenges and high cost inflation expected to persist for the remainder of the year. Specifically, the Company's updated its2022 guidance as follows:

•~~Organic~~Raises its guidance for organic-basis net sales growth ~~is now expected~~ to ~~be 2-3% in 2021, an increase~~approximately +10%, from ~~previous~~its prior guidance of ~~0-1%, despite lapping last year's exceptional growth.~~+7-8%. This reflects better-than-expected growth through the most recent quarter, as well as revenue growth management actions and good in-market momentum, particularly in snacks and emerging markets.

•~~Currency-neutral adjusted~~Raises its guidance for adjusted-basis operating profit growth ~~is unchanged~~to approximately +6% on a currency-neutral basis, from its prior guidance of +4-5%. This reflects the Company's better-than-expected results in its latest quarter, ~~calling for a decline of approximately (1)-(2)% year on year as it laps last year's exceptional growth.~~and incorporates continued high cost inflation, bottlenecks and shortages, and increased brand investment in the second half.

•~~Currency-neutral adjusted~~Raises its guidance for adjusted-basis earnings per share ~~for~~growth to approximately +3% on a currency-neutral basis, from prior guidance of approximately +2%. This reflects the ~~full year is unchanged~~improved operating profit outlook, partially offset by a further reduction in non-operating, non-cash pension income, stemming from ~~the prior quarter, estimated to increase by approximately +1-2% year on year.~~a remeasurement that now reflects this year's higher interest rates and sharply lower equity and bond values.

•~~Net~~Updates its expectation for net cash provided by operating activities ~~is unchanged from prior quarter, expected~~ to ~~finish 2021 at~~be approximately ~~$1.6 -~~ $1.7 billion, with capital expenditure of approximately $0.5 ~~billion. As a result, our non-GAAP measure~~billion, resulting in affirming its guidance for cash flow ~~is estimated at $1.1 -~~of approximately $1.2 billion.

~~Due to the current supply and labor challenges, operating profit, earnings per share, and cash flow could finish at the lower end of these guidance ranges.~~ Excluded from this guidance are any significant supply chain or other prolonged market disruptions related to the pandemic ~~the~~or global ~~economy, a prolonged U.S. labor strike, or unexpected events that may be realized in the remainder of the year.~~economy.

Reconciliation of non-GAAP measures

We are unable to reasonably estimate the potential full-year financial impact of mark-to-market adjustments because these impacts are dependent on future changes in market conditions. Similarly, because of volatility in foreign exchange rates and shifts in country mix of our international earnings, we are unable to reasonably estimate the potential full-year financial impact of foreign currency translation.

As a result, these impacts are not included in the guidance provided. Therefore, we are unable to provide a full reconciliation of these non-GAAP measures used in our guidance without unreasonable effort 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.

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See the table below that outlines the projected impact of certain other items that are excluded from non-GAAP guidance for ~~2021:~~2022:


Impact of certain items excluded from Non-GAAP guidance:	Net Sales	Operating Profit	Earnings Per Share
Separation costs (pre-tax)		$70-$80M	$0.21-$0.24
Business and portfolio realignment (pre-tax)		$30-$40M	$0.09-$0.12
Gain related to interest rate swaps (pre-tax)			($0.05)
Income tax impact applicable to adjustments, net**			~$~~0.03~~0.09
~~UK tax rate change~~			~~$0.07~~
~~Foreign valuation allowance~~			~~$0.06~~




Currency-neutral adjusted guidance*		~~~(1)-(2)%~~6%	~~~1-2%~~3%


Organic guidance*	~~~2-3%~~10%

* ~~2021~~2022 full year guidance for net sales, operating profit, and earnings per share are provided on a non-GAAP 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. These items for ~~2021~~2022 include impacts of mark-to-market adjustments for pension plans (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. The Company is providing quantification of known adjustment items where available.

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

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Reconciliation of Non-GAAP amounts - Cash Flow Guidance
(billions)			Full Year ~~2021~~2022
Net cash provided by (used in) operating activities			~~$1.6-~~$1.7
Additions to properties			~($0.5)
Cash Flow			~~$1.1-~~~$1.2

Forward-looking statements

This Report contains “forward-looking statements” with projections concerning, among other things, the anticipated separation of the Company’s North American cereal and plant-based foods businesses, the Company’s restructuring programs, the integration of acquired businesses, our strategy, financial principles, and plans, initiatives, improvements and growth; sales, 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; 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,” 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 the ability to effect the separation transactions and to meet the conditions related thereto; the ability of the separated companies to each succeed as a standalone publicly traded company; potential uncertainty during the pendency of the separation transactions that could affect the Company’s financial performance; the possibility that the separation transactions will not be completed within the anticipated time period or at all, including with respect to the potential sale of our plant-based foods business; the possibility that the separation transactions will not achieve their intended benefits; the possibility of disruption, including changes to existing business relationships, disputes, litigation or unanticipated costs in connection with the separation transactions; uncertainty of the expected financial performance of the Company or the separated companies following completion of the separation transactions; negative effects of the announcement or pendency of the separation transactions on the market price of the Company’s securities and/or on the financial performance of the Company; uncertainty of the magnitude, duration, geographic reach, impact on the global economy and current and potential travel restrictions of the COVID-19 outbreak, the current, and uncertain future, impact of the COVID-19 outbreak on our business, growth, reputation, prospects, financial condition, operating results (including components of our financial results), and cash flows and liquidity, the ~~length and severity~~residual impact of the 12-week labor strike at the Company's ~~current work stoppage at~~ U.S. cereal ~~manufacturing~~ plants and a fire at one of the plants, the impact of the war in Ukraine including the potential for broader economic disruption, the ability to implement restructuring as planned, whether the expected amount of costs associated with restructuring will differ from forecasts, whether we will be

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able to realize the anticipated benefits from restructuring in the amounts and times expected, the ability to realize the anticipated benefits and synergies from business acquisitions in the amounts and at the times expected, the impact of competitive conditions, the effectiveness of pricing, advertising, and promotional programs; the success of innovation, renovation and new product introductions; the recoverability of the carrying value of goodwill and other intangibles, the success of productivity improvements and business transitions, commodity and energy prices, transportation costs, labor costs, disruptions or inefficiencies in supply chain, the availability of and interest rates on short-term and long-term financing, actual market performance of benefit plan trust investments, the levels of spending on systems initiatives, properties, business opportunities, integration of acquired businesses, and other general and administrative costs, changes in consumer behavior and preferences, the effect of U.S. and foreign economic conditions on items such as interest rates, statutory tax rates, currency conversion and availability, legal and regulatory factors including changes in food safety, advertising and labeling laws and regulations, the ultimate impact of product recalls; business disruption or other losses from war, terrorist acts or political unrest; and the risks and uncertainties described in Item 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 87 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 ~~2020~~2021 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 October ~~2, 2021.~~1, 2022.

Volatile market conditions arising from the COVID-19 pandemic and the war in Ukraine 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 our net sales and operating profit when translated to U.S. dollars. Primary exposures include the U.S. dollar versus the euro, British pound, Australian dollar, Canadian dollar, Mexican peso, Brazilian real, Nigerian naira, Russian ruble, Polish zloty and Egyptian pound, and in the case of inter-subsidiary transactions, the British pound versus the euro. There

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is significant uncertainty surrounding the impact of COVID-19 and the war in Ukraine on financial markets and we will continue to monitor the business for adverse impacts related to the pandemic. Our business in Russia represented less than 1.5% of consolidated net sales and approximately 1% of consolidated operating profit for the year ended January 1, 2022. The net book value of assets related to our Russia business represents approximately 0.5% of total assets as of October 1, 2022. As such, our exposure to volatility in the exchange rate of the Russian ruble is unlikely to have a material impact on our consolidated financial statements.

~~In May~~The impact of ~~2021,~~possible currency devaluation in countries experiencing high inflation rates or significant exchange fluctuations, including Turkey, can impact our results and financial guidance. Effective April 3, 2022, we accounted for Turkey as a highly inflationary economy, as the ~~Company issued €300 million~~projected three-year cumulative inflation rate exceeded 100%. Accordingly, our Turkey subsidiary uses the U.S. dollar as its functional currency and changes in the value of ~~eight-year 0.50% Euro Notes due 2029,~~the Turkish Lira versus the U.S. dollar applied to our Lira-denominated net monetary asset position is recorded in income at the time of the change. Net monetary assets denominated in Turkish Lira are not material as of October 1, 2022.

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During the year-to-date period ended October 1, 2022, we settled certain U.S. Dollar forward starting interest rate swaps and treasury locks with notional amounts totaling approximately $1.0 billion, resulting in ~~net proceeds~~a realized gain of ~~€298 million after discount and underwriting commissions. In connection with this debt issuance,~~approximately $105 million. During the ~~Company terminated~~year-to-date period ended October 1, 2022, we also settled certain Euro forward starting interest rate swaps with notional amounts totaling ~~€250~~approximately €450 million, resulting in a ~~$6 million gain.~~realized gain of approximately $60 million. These forward starting interest rate swaps and treasury locks were accounted for as cash flow hedges and the related gain was recorded in accumulated other comprehensive income and will be amortized to interest expense over the term of the ~~Notes.~~

forecasted fixed rate U.S. Dollar and Euro debt, once issued. During the year-to-date period ended October ~~2, 2021,~~1, 2022, we also entered into U.S. forward starting interest rate swaps and treasury locks with notional amounts totaling approximately $1.0 billion and Euro forward starting interest rate swaps with notional amounts totaling approximately €450 million, as hedges against interest rate volatility associated with a forecasted issuance of fixed rate U.S. Dollar and Euro debt. These swaps were designated as cash flow hedges.

We have interest rate contracts with notional amounts totaling ~~$450 million. The interest rate contracts are designated~~$2.6 billion representing a net settlement obligation of $30 million as ~~fair value hedges~~ of ~~certain U.S. Dollar debt.~~October 1, 2022. We ~~have~~had interest rate contracts with notional amounts totaling $2.8 billion representing a net settlement receivable of ~~$87 million as of October 2, 2021. We had interest rate contracts with notional amounts totaling $2.6 billion representing a net settlement receivable of $46~~$4 million as of January ~~2, 2021.~~1, 2022.

During the ~~quarter~~year-to-date period ended October ~~2, 2021,~~1, 2022, we settled cross currency swaps with notional amounts totaling approximately ~~€600~~€565 million, resulting in a gain of ~~$18~~$37 million. These cross currency swaps were accounted for as net investment hedges and the related ~~loss~~gain was recorded in accumulated other comprehensive income. During the ~~quarter~~year-to-date period ended October ~~2, 2021,~~1, 2022, we also entered into cross currency swaps with notional amounts totaling approximately ~~€600 million,~~€1.3 billion, as hedges against foreign currency volatility associated with our net investment in our wholly-owned foreign subsidiaries. These swaps were designated as net investment hedges. We have cross currency swaps with notional amounts totaling ~~$1.4~~$1.8 billion outstanding as of October ~~2, 2021~~1, 2022 representing a net settlement receivable of ~~$35~~$278 million. The total notional amount of cross currency swaps outstanding as of January ~~2, 2021~~1, 2022 was ~~$1.4~~$1.3 billion representing a net settlement ~~obligation~~receivable of $4$38 million.

Our Company is exposed to price fluctuations primarily as a result of anticipated purchases of raw and 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.

Events such as the ongoing COVID-19 pandemic and the war in Ukraine have resulted in certain impacts to the global economy, including market disruptions, supply chain challenges, and inflationary pressures. During the year-to-date period ended October 1, 2022, we continue to experience elevated commodity and supply chain costs, including logistics, procurement, and manufacturing costs. We expect these market disruptions and inflationary pressures to continue throughout 2022.

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 October ~~2, 2021,~~1, 2022, 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.

There were no changes during the quarter ended October 1, 2022, that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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KELLOGG COMPANY

PART II — OTHER INFORMATION

Item 1A. Risk Factors

Except as set forth below, 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 January ~~2, 2021.~~1, 2022. 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.~~results of operations. 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.~~results of operations.

~~Risks Related~~The proposed separation of each of our North American cereal and plant-based foods businesses is subject to ~~Our Operations~~various risks and uncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all, and will involve significant time, expense, and resources, which could disrupt or adversely affect our business.

~~A shortage~~

On June 21, 2022, the Company announced a plan to separate its North American cereal and plant-based foods businesses, via tax-free spin-offs, with a target to complete the transactions by the end of 2023, resulting in three independent public companies, each better positioned to unlock their full standalone potential. We cannot assure that the transactions will be completed on the anticipated timeline or at all or that the terms of the separations will not change, including with respect to the potential sale of our plant-based foods business. The transactions will follow the satisfaction of customary conditions, including reviews and final approval by Kellogg’s Board of Directors, receipt of an Internal Revenue Service ruling and relevant tax opinions with respect to the tax-free nature of the transactions, effectiveness of appropriate filings with the U.S. Securities and Exchange Commission, and the completion of audited financials of the new independent companies. The failure to satisfy any of the required conditions could delay the completion of the spin-offs for a significant period of time or prevent them from occurring at all.

Unanticipated developments, including changes in the ~~labor pool,~~competitive conditions of our markets, possible delays in obtaining various tax opinions or rulings, negotiating challenges, the uncertainty of the financial markets, changes in the law, and challenges in executing the separation of the two businesses, could delay or prevent the completion of the spin-offs, or cause the spin-offs to occur on terms or conditions that are different or less favorable than initially expected. Any changes to the spin-offs or delay in completing the spin-offs could cause us not to realize some or all of the expected benefits, or realize them on a different timeline than initially expected. Further, our Board of Directors could decide, either because of a failure of conditions or because of market or other factors, to abandon the spin-offs. In addition, while we announced a plan to separate our plant-based food business through a tax free spin-off, we are also exploring other strategic alternatives, including a possible sale. No assurance can be given as to whether and when the spin-offs will occur.

Whether or not we complete the spin-offs, our ongoing business may be adversely affected and we may be subject to certain risks and consequences as a result of pursuing the spin-offs, including the following:

a.We have incurred expenses in connection with the spin-offs, and expect that the process of completing the spin-offs will be time-consuming and involve significant additional costs and expenses, which may not yield a discernible benefit if the spin-offs are not completed.

b.Executing the spin-offs will require significant time and attention from our senior management and employees, which may divert management’s attention from operating and growing our business and could adversely affect our business, financial results, and results of operations. Our employees may also be distracted due to uncertainty about their future roles with the separate companies pending completion of the spin-offs.

c.We may also experience increased difficulties in attracting, retaining, and motivating employees during the pendency of the spin-offs and following completion of the transactions, which could harm our businesses. In addition, if the spin-offs are not completed, we will still be required to pay certain costs and expenses incurred in connection therewith, such as legal, accounting, and other professional fees.

d.Some of our customers or suppliers may delay or defer decisions or may end their relationships with us.

e.We may experience negative reactions from the financial markets if we fail to complete the spin-offs or fail to complete them on a timely basis.

f.The announcement of the spin-offs may cause some investors to sell our shares, creating greater volatility in the trading price of our shares and potentially causing market prices to decline.

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Any of the above factors could cause the separations (or the failure to ~~successfully negotiate collectively bargained agreements, or other general inflationary pressures or changes in applicable laws and regulations could increase labor cost, which could~~execute the separations) to have a material adverse effect on our ~~consolidated operating~~business, financial condition, results ~~or financial condition~~. ~~Our labor costs include~~of operations, and the cost of providing benefits for employees. We sponsor a number of benefit plans for employees in the United States and various foreign locations, including pension, retiree health and welfare, active health care, severance and other postemployment benefits. We also participate in multiemployer pension plans for certaintrading price of our manufacturing locations. Our major pension plans and U.S. collectively bargained retiree health and welfare plans are funded with trust assets invested in a globally diversified portfolio of equity securities with smaller holdings of bonds, real estate and other investments. The annual cost of benefits can vary significantly from year to year and is materially affected by such factors as changes in the assumed or actual rate of return on major plan assets, a change in the weighted-average discount rate used to measure obligations, the rate or trend of health care cost inflation, and the outcome of collectively-bargained wage and benefit agreements. Many of our employees are covered by collectively-bargained agreements and other employees may seek to be covered by collectively-bargained agreements. Strikes or work stoppages and interruptions ~~have occurred and are occurring, including an ongoing work stoppage and related negotiations of a collectively bargained agreement at our U.S. ready-to-eat cereal manufacturing locations, a~~nd could occur if we are unable to renew these agreements on satisfactory terms or enter into new agreements on satisfactory terms, which could adversely impact our operating results. The terms and conditions of existing, renegotiated or new agreements could also increase our costs or otherwise affect our ability to fully implement future operational changes to enhance our efficiency.common stock.

The spin-offs may not achieve the anticipated benefits and will expose us to new risks.

We may not realize the anticipated strategic, financial, operational, or other benefits from the spin-offs. We cannot predict with certainty when the benefits expected from the spin-offs will occur or the extent to which they will be achieved. If the spin-offs are completed, our operational and financial profile will change and we will face new risks. As independent, publicly traded companies, our North American cereal and plant-based food businesses will each be smaller, less-diversified companies and may be more vulnerable to changing market conditions. There is no assurance that following the spin-offs each separate company will be successful. The announcement and/or completion of the spin-offs may cause uncertainty for or disruptions with our customers, partners, suppliers, and employees, which may negatively impact these relationships or our operations. In addition, we will incur one-time costs and ongoing costs in connection with, or as a result of, the spin-offs, including costs of operating as independent, publicly-traded companies that the three businesses will no longer be able to share. Those costs may exceed our estimates or could negate some of the benefits we expect to realize. If we do not realize the intended benefits or if our costs exceed our estimates, we or the businesses that are spun off could suffer a material adverse effect on the business, financial condition, results of operations, and trading price of us or the separated businesses.

If the proposed spin-offs are completed, the trading price of our common stock may decline and may experience greater volatility.

Upon completion of the proposed spin-offs, because the trading price for our shares will no longer reflect the value of the separated businesses, such trading price may be lower than immediately prior to the spin-offs. In addition, until the market has fully analyzed our value without the separated businesses, the price of our shares may experience greater volatility. If the proposed spin-offs are completed, our shares may not match some holders’ investment strategies or meet minimum criteria for inclusion in stock market indices or portfolios, which could cause certain investors to sell their shares, which could lead to declines in the trading price of our common stock. Further, there can be no assurance that the combined value of the shares of the three resulting companies will be equal to or greater than what the value of our common stock would have been had the proposed spin-offs not occurred.

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

In February 2020, the board of directors approved an authorization to repurchase up to $1.5 billion of the Company's common stock through December 2022. ~~These authorizations are~~This authorization is intended to allow the Company to repurchase shares for general corporate purposes and to offset issuances for employee benefit programs.

The following table provides information with respect to purchases of common shares under programs authorized by our board of directors during the quarter ended October ~~2, 2021.~~1, 2022.

(millions, except per share data)

Period

(a) Total Number
of Shares
Purchased

(b) Average Price
Paid Per Share

(d) Approximate
Dollar Value of
Shares that May
Yet Be
Purchased
Under the Plans
or Programs

Month #1:

7/~~4/2021~~3/2022 - 7/~~31/2021~~30/2022

—

~~1,260~~960

Month #2:

~~8/1/2021~~7/31/2022 - 8/~~28/2021~~27/2022

—

~~1,260~~960

Month #3:

8/~~29/2021~~28/2022 - 10/~~2/2021~~1/2022

—

~~1,260~~960

Total

—

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Item 6. Exhibits

(a)Exhibits:


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 Amit Banati
32.1			Section 1350 Certification from Steven A. Cahillane
32.2			Section 1350 Certification from 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

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KELLOGG COMPANY

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.


KELLOGG COMPANY

/s/ Amit Banati
Amit Banati
Principal Financial Officer; Senior Vice President and Chief Financial Officer

/s/ Kurt Forche
Kurt Forche
Principal Accounting Officer; Vice President and Corporate Controller

Date: November ~~5, 2021~~3, 2022

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KELLOGG COMPANY

EXHIBIT INDEX


Exhibit No.	Description	Electronic (E) Paper (P) Incorp. By Ref. (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 Amit Banati	E
32.1	Section 1350 Certification from Steven A. Cahillane	E
32.2	Section 1350 Certification from 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



As of January 2, 2021:			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	$	164	$	(116)	$	—	$	48
Total liability derivatives	$	(143)	$	116	$	5	$	(22)


Consolidated Balance Sheet
(millions)	October 2, 2021 (unaudited)		January 2, 2021
Trade receivables	$	1,441	$	1,272
Allowance for credit losses	(17)		(19)
Refundable income taxes	20		66
Other receivables	236		218
Accounts receivable, net	$	1,680	$	1,537
Raw materials and supplies	$	374	$	338
Finished goods and materials in process	1,004		946
Inventories	$	1,378	$	1,284
Intangible assets not subject to amortization	$	2,048	$	2,068
Intangible assets subject to amortization, net	393		423
Other intangibles, net	$	2,441	$	2,491