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Section 1: 8-K (8-K)

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
  
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): February 6, 2020
Kellogg Company
(Exact name of registrant as specified in its charter)
Delaware
 
1-4171
 
38-0710690
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
One Kellogg Square
Battle Creek, Michigan 49016-3599
(Address of principal executive offices, including zip code)
(269) 961-2000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below): 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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
1.750% Senior Notes due 2021
K 21
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
 
 
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
 
 
 
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.
 
 






Item 2.02. Results of Operations and Financial Condition.

The information in this Current Report, including the attached Exhibit, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

On February 6, 2020, Kellogg Company issued a press release announcing financial results for the period ended December 28, 2019, a copy of which is attached as Exhibit 99.1.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit 99.1     Press Release dated February 6, 2020







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 hereunto duly authorized.
 
 
KELLOGG COMPANY
 
 
Date: February 6, 2020
/s/ Amit Banati
 
Name:
 
Amit Banati
 
Title:
 
Senior Vice President and Chief Financial Officer




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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1
 402674605_kellogglogo2015a06.jpg    
 
Kellogg Company
 
Financial News Release
 
 
 
Analyst Contact:
 
John Renwick, CFA (269) 961-9050
 
Jamie Duies, CFA (269) 961-2486
 
 
 
Media Contact:
 
Kris Bahner, (269) 961-3799
 
 

Kellogg Company Reports Solid Finish to 2019 and Issues 2020 Financial Guidance
BATTLE CREEK, Mich. - February 6, 2020 - Kellogg Company (NYSE: K) today announced fourth quarter and full year 2019 results and provided a financial outlook for 2020.

Highlights:
The Company delivered full year net sales growth on a reported and organic basis.
The Company's results finished the year within or better than its guidance ranges for each of its key metrics: Currency-neutral net sales, currency-neutral adjusted operating profit, currency-neutral adjusted earnings per share, and cash flow.
The divestiture of non-core businesses in late July enhances the long-term focus, profitability, and underlying growth of the Company's portfolio, while the absence of their results caused a decline in reported net sales and operating profit in the fourth quarter and the second half of the year.
In the fourth quarter, the Company sustained its return to organic-basis net sales growth, featuring broad-based growth and improved balance between volume and price.
Productivity actions, revenue growth management, and savings from organizational restructurings progressively delivered savings throughout the year.
Kellogg issued guidance¹ for 2020 that calls for sustained organic net sales growth, improved cash flow, and currency-neutral adjusted operating profit and earnings per share growth excluding the impact of its recent divestiture.

"In 2019, our primary financial objective was to deliver sales growth, and we did exactly that," said Steve Cahillane, Kellogg Company's Chairman and Chief Executive Officer. "By executing our Deploy For Growth strategy, we posted sales growth for the full year, across key brands and categories. Importantly, we delivered this growth and our other financial commitments while realigning our organizational structure, reshaping our portfolio, and investing in our supply chain. These actions are building a foundation for steady, reliable growth in sales, profit, and cash flow for years to come."



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¹ Guidance and goals expressed in this press release are on an or currency-neutral basis, and adjusted to exclude restructuring charges, mark-to-market adjustments of pensions (service cost, interest cost, expected return on plan assets, and other net periodic pension costs are not excluded) and various financial instruments, and other costs impacting comparability. Organic basis also excludes acquisitions, divestitures, and differences in shipping days. Expected net sales, margins, 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. Please refer to the "Non-GAAP Financial Measures" section included later in this press release for a further discussion of our use of non-GAAP measures, including quantification of known expected adjustment items. The company will use the term "low single digit" to refer to percent changes of up to 3%, "mid single-digit" to refer to percent changes between 4% and 6%, "high single-digit" to refer to percent changes between 7% up to 10%, and "double-digit" to refer to percent changes of 10% or more.


Financial Summary:
 
Quarter ended
 
Year ended
(millions, except per share data)
 
December 28, 2019
 
December 29, 2018
 
%
Change
 
December 28, 2019
 
December 29, 2018
 
%
Change
Reported Net Sales
 
$
3,223

 
$
3,317

 
(2.8
)%
 
$
13,578

 
$
13,547

 
0.2
 %
Currency-Neutral Net Sales *
 
$
3,224

 
$
3,317

 
(2.8
)%
 
$
13,810

 
$
13,547

 
1.9
 %
Organic Net Sales *
 
$
3,224

 
$
3,141

 
2.7
 %
 
$
13,489

 
$
13,239

 
1.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported Operating Profit
 
$
360

 
$
326

 
10.5
 %
 
$
1,401

 
$
1,706

 
(17.8
)%
Adjusted Operating Profit *
 
$
403

 
$
433

 
(6.8
)%
 
$
1,764

 
$
1,880

 
(6.1
)%
Currency-Neutral Adjusted Operating Profit *
 
$
403

 
 
 
(6.9
)%
 
$
1,788

 
 
 
(4.9
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported Diluted Earnings Per Share
 
$
0.42

 
$
(0.24
)
 
N/A

 
$
2.80

 
$
3.83

 
(26.9
)%
Adjusted Diluted Earnings Per Share *
 
$
0.91

 
$
0.91

 
 %
 
$
3.94

 
$
4.33

 
(9.0
)%
Currency-Neutral Adjusted Diluted Earnings Per Share *
 
$
0.91

 
 
 
 %
 
$
4.00

 
 
 
(7.6
)%
* Non-GAAP financial measure. See "Non-GAAP Financial Measures" section and "Reconciliation of Non-GAAP Amounts" tables within this release for important information regarding these measures.
Fourth Quarter & Full Year 2019 Consolidated Results
Kellogg's fourth quarter 2019 GAAP (or "reported") net sales decreased by approximately 3% year on year. The absence of results from divested businesses reduced net sales in the quarter by nearly 6%. On an organic basis, net sales increased by nearly 3%.
Full year reported net sales increased by less than 1% year on year, as the absences of results from divested businesses and adverse currency translation were more than offset by improved organic growth and the May 2018 consolidation of Multipro, the company's distributor in West Africa. On an organic basis, net sales increased by nearly 2%.
Fourth quarter 2019 reported operating profit increased slightly less than 11% versus the prior-year quarter as a decrease in one-time charges more than offset the absence of results from divested businesses. Adjusted and currency-neutral adjusted operating profit declined by almost 7%, as growth in the base business was more than offset by the absence of results from divested businesses.
Full year reported operating profit decreased approximately 18% year on year due to the absence of results from divested businesses and higher one-time charges. On an adjusted basis, operating profit declined by approximately 6% due to the absence of results from divested businesses and cost pressures. Excluding currency translation, adjusted operating profit declined by less than 5%.

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Fourth quarter 2019 reported earnings per share improved year over year as lower mark-to-market charges were partially offset by increased one-time charges and the absence of results from divested businesses. On an adjusted and currency-neutral adjusted basis, earnings per share were in line with the year-ago quarter as lower net interest expense, higher other income, and lower diluted shares outstanding largely offset the absence of results from divested businesses.
Full year reported earnings per share decreased approximately 27% from the prior year as higher one-time charges and the absence of results from divested businesses were partially offset by lower mark-to-market charges. On an adjusted basis, earnings per share declined approximately 9% on cost pressures, the absence of results from divested businesses, and adverse foreign currency translation. Excluding currency translation, adjusted earnings per share declined by less than 8%.
Fourth Quarter and Full Year 2019 Business Performance
Please refer to the segment tables in the back of this document.
Kellogg Company's primary financial objective in 2019 was to deliver net sales growth through the execution of its Deploy For Growth strategy, and building on the brand revitalization and capabilities enhancements in which it had invested heavily in 2018. In addition, during 2019, the Company undertook a comprehensive reorganization across the globe, aimed at improving speed of decision-making and agility in resource allocation. It also completed the divestiture of several businesses (cookies, fruit snacks, pie crusts, and ice cream cones) in order to create greater focus on its core categories and improve the overall growth and profitability of its portfolio. By prioritizing debt reduction, the Company improved its financial flexibility in 2019, after having made several strategic acquisitions in recent years.
Principally because of the absence of results from businesses divested in July 2019, Kellogg Company's reported net sales in the fourth quarter declined and were up only slightly for the full year. On an organic basis, net sales grew year on year both in the quarter and the full year, tangible evidence that its Deploy For Growth strategy is working. Meanwhile, the Company progressively delivered savings throughout the year from productivity actions, revenue growth management, and savings from organizational restructurings.
Kellogg North America's reported net sales in the fourth quarter declined by 7% primarily due to the the absence of results from divested businesses. On an organic basis, net sales improved by over 1%. In snacks, reported net sales declined because of the the absence of results from divested businesses, while organic net sales growth was supported by sustained consumption growth momentum for Cheez-It, Pringles, Rice Krispies Treats, and Pop-Tarts, as well a return to growth for Club crackers and Nutri-Grain wholesome snacks. Frozen foods net sales and consumption growth continued in the fourth quarter, led by the Company's leading brand of frozen plant-based meat alternatives, MorningStar Farms, which again grew consumption at a double-digit rate, while gaining share. In cereal, net sales and consumption declines moderated as its growth and share gains accelerated in the taste-fun segment, led by key brands Frosted Flakes, Froot Loops, Corn Pops, and Krave behind increased commercial activity. Kellogg North America's fourth quarter operating profit increased owing primarily to lower one-time charges. On an adjusted basis, operating profit declined 5%, as growth in the base business was more than offset by the absence of results from divested businesses.
For the full year, Kellogg North America's net sales declined 3% primarily due to the absence of results from divested businesses. On an organic basis, net sales were up slightly year on year, as growth in snacks and frozen foods was partially offset by a decline in cereal, where commercial activity had been reduced in the first half, as the Company executed a pack-size harmonization. Full year Kellogg North America's reported operating profit declined 13% due to higher one-time charges and the absence of results from divested businesses. On an adjusted basis, operating profit declined by 5% in 2019, primarily reflecting the absence of results from divested businesses and cost pressures.

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Kellogg Europe's reported net sales in the fourth quarter increased by about 3%, with foreign currency translation only modestly negative. On an organic basis, net sales increased by more than 3%, again led by snacks, and particularly the sustained consumption growth momentum for Pringles. Cereal net sales continued to stabilize, led by overall consumption growth in the Region. Kellogg Europe's reported operating profit improved by 43% in the fourth quarter, primarily due to lower one-time charges. On a currency-neutral adjusted basis, operating profit improved 15% on the improved net sales and profit margins.
For the full year, Kellogg Europe's reported net sales declined by over 1%, due to adverse foreign currency translation. On an organic basis, net sales increased by over 3%, led by Pringles growth momentum and continued expansion in Russia and Central Europe. Cereal net sales stabilized, with a return to overall regional consumption growth in the second half of the year. Full year reported operating profit declined 11% due to increased one-time charges, and adverse foreign currency translation. On a currency-neutral adjusted basis, operating profit increased by 5% on higher net sales.
Kellogg Latin America's reported net sales in the fourth quarter decreased by approximately 2% due to the absence of results from divested businesses and adverse foreign currency translation. On an organic basis, net sales growth was slightly positive, less than 1%, held back by softened macroeconomic conditions in Puerto Rico, Argentina, and Brazil, along with distributor transitions in Central America. These headwinds were more than offset by continued consumption growth in Mexico, across cereal, salty snacks, and portable wholesome snacks, stabilization in the Andean markets, and share gains in key categories in Brazil. Notable in the quarter was the ramp-up of new production facilities in Brazil, for Pringles and for cereal, which created incremental costs in the quarter but should benefit the sales and profit performance for this key market in the future. Kellogg Latin America's reported operating profit declined by 27% in the fourth quarter, reflecting costs related to the ramp up of new production and adverse currency translation; on a currency-neutral adjusted basis, operating profit declined by 21%, reflecting costs related to the ramp-up of new production and distribution, category mix, and the absence of results from divested businesses.
For the full year, Kellogg Latin America's reported net sales declined by less than 1% primarily from adverse currency translation. On an organic basis, net sales increased by 3%, led by Mexico, where the Company's consumption and share grew across all three major categories (cereal, salty snacks, portable wholesome snacks), and Mercosur, where consumption and share gains across categories in Brazil more than offset challenging conditions in Argentina. Kellogg Latin America's full year reported operating profit declined by 17%, due to higher one-time charges, increased investment in capabilities, and higher costs related to ramping up new production facilities. On a currency-neutral adjusted basis, operating profit declined 10%, reflecting increased investment in capabilities and higher costs related to ramping up new production facilities.
Kellogg Asia Pacific, Middle East and Africa's ("AMEA") reported net sales in the fourth quarter increased by more than 8%, with organic-basis growth of over 8%. Growth was led by Africa, on expansion of Pringles and noodles, and continued growth by Multipro, the Company's distributor business in West Africa, in spite of challenging market conditions. Asia growth was driven by cereal and snacks, and in Australia, growth was driven by consumption growth in both Pringles and cereal. The Company continued to ramp up new production in a Pringles plant in South Africa, as well as new noodles capacity in Egypt and South Africa, incurring incremental costs, but facilitating long-term growth into the future. Kellogg AMEA's reported operating profit increased by 2% in the fourth quarter, as lower one-time charges were partially offset by other cost pressures in the Region and adverse currency translation. On a currency-neutral, adjusted basis, the Region's operating profit declined by approximately 7% in the quarter, held down by the ramp-up of production expansions and other cost pressures in the region.
For the full year, Kellogg AMEA's reported net sales increased by over 20%, aided by a full year of results from Multipro, the Company's distributor business in West Africa, that was consolidated in May 2018, and partially offset by adverse foreign currency translation. On an organic basis, net sales increased by over 7% for the full year, driven by the continued growth of the Multipro distributor business in West Africa, expansion of Kellogg's branded noodles in Africa and the Middle East, and broad-based consumption growth for Pringles and cereal across Asia and Australia. The Region's reported operating profit increased 12% for the

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full year, largely attributable to the increased net sales, partially offset by other cost pressures in the Region and adverse foreign currency translation. On a currency-neutral, adjusted basis, operating profit increased by 14%, driven by organic net sales growth and the inclusion of a full year of results of Multipro.

2020 Full-Year Financial Guidance
The Company issued its initial financial guidance for 2020. Specifically, the Company is projecting:
Organic net sales to increase by +1-2%.
Adjusted operating profit on a currency-neutral basis is expected to decline (4)%, as the absence of results from divested businesses more than offsets growth in the base business.
Adjusted earnings per share, on a currency-neutral basis, is expected to decline (3) to (4)%,as the absence of results from divested businesses more than offsets growth in the base business.
Cash flow is expected to improve to $0.9 to $1.0 billion.

Conference Call / Webcast
Kellogg will host a conference call to discuss results and outlook on Thursday, February 6, 2020 at 9:30 a.m. Eastern Time. The conference call and accompanying presentation slides will be broadcast live over the Internet at http://investor.kelloggs.com. Analysts and institutional investors may participate in the Q&A session by dialing (855) 209-8258 in the U.S., and (412) 542-4104 outside of the U.S. Members of the media and the public are invited to attend in a listen-only mode. Information regarding the rebroadcast is available at http://investor.kelloggs.com.
About Kellogg Company
At Kellogg Company (NYSE: K), we strive to enrich and delight the world through foods and brands that matter. Our beloved brands include Pringles®, Cheez-It®, Special K®, Kellogg's Frosted Flakes®, Pop-Tarts®, Kellogg's Corn Flakes®, Rice Krispies®, Eggo®, Mini-Wheats®, Kashi®, RXBAR® and more. Net sales in 2019 were approximately $13.6 billion, comprised principally of snacks and convenience foods like cereal and frozen foods. Kellogg brands are beloved in markets around the world. We are also a company with Heart & Soul, committed to creating Better Days for 3 billion people by the end of 2030 through our Kellogg’s® Better Days global purpose platform. Visit www.KelloggCompany.com or www.OpenforBreakfast.com.



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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 include currency-neutral and organic net sales, adjusted and currency-neutral adjusted operating profit, adjusted and currency-neutral adjusted diluted EPS, currency-neutral adjusted gross profit, currency-neutral adjusted gross margin, 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, foreign currency, and differences in shipping days 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 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 operating profit and diluted EPS: We adjust the GAAP financial measures to exclude the effect of restructuring programs, 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), commodities and certain foreign currency contracts, multi-employer pension plan exit liabilities, the gain on the divestiture of our cookies, fruit snacks, pie crusts, and ice cream cone businesses, and other costs impacting comparability. 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.
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, 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), commodities and certain foreign currency contracts, multi-employer pension plan exit liabilities, the gain on the divestiture of our cookies, fruit snacks, pie crusts, and ice cream cone businesses, other costs impacting comparability, and foreign currency,

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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 Other income (expense), net: We adjust the GAAP financial measure to exclude the effect of restructuring programs, 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), the gain on the divestiture of our selected cookies, fruit snacks, pie crusts, and ice cream cone businesses, and other costs impacting comparability. We excluded the items which we believe may obscure trends in our underlying profitability. By providing this non-GAAP measure, management intends to provide investors with a meaningful, consistent comparison of the Company's Other income (expense), net, excluding the impact of the items noted above, for the periods presented. Management uses these non-GAAP financial measures to evaluate the effectiveness of initiatives intended to improve profitability.
Adjusted effective income tax rate: We adjust the GAAP financial measures to exclude the effect of restructuring programs, 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), commodities and certain foreign currency contracts, multi-employer pension plan exit liabilities, the gain on the divestiture of our selected cookies, fruit snacks, pie crusts, and ice cream cone businesses, and other costs impacting comparability. We excluded the items which we believe may obscure trends in our pre-tax income, the related tax effect of those items, and other impacts to tax expense, including U.S. Tax Reform and certain out-of-period adjustments, on our adjusted effective income tax rate. 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.
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.

Forward-looking guidance for organic net sales, currency-neutral adjusted operating profit, currency-neutral diluted EPS, and cash flow is included in this press release. Guidance for organic net sales excludes the impact of foreign currency translation, acquisitions, divestitures, and differences in shipping days. Guidance for operating profit excludes the impact of costs related to restructuring programs, mark-to-market adjustments (service cost, interest cost, expected return on plan assets, and other net periodic pension costs are not excluded), multi-employer pension plan exit liabilities, and other items that could affect comparability, and foreign currency translation. Guidance for earnings per share excludes the impact of costs related to restructuring programs, mark-to-market adjustments (service cost, interest cost, expected return on plan assets, and other net periodic pension costs are not excluded), multi-employer pension plan exit liabilities,

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the gain on the divestiture of selected cookies fruit snacks, pie crusts, and ice cream cone businesses, and other items that could affect comparability, and foreign currency translation. We have provided these non-GAAP measures for future guidance for the same reasons that were outlined above for historical 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 (interest rates, return on assets, and commodity prices). 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.

    See the table below that outlines the projected impact of certain other items that are excluded from non-GAAP guidance for 2020:
Impact of certain items excluded from Non-GAAP guidance:
Net Sales
Operating Profit
Earnings Per Share
Business and portfolio realignment (pre-tax)
 
~$60-$70M
~$0.17-$0.20
Income tax impact applicable to adjustments, net**
 
 
~$0.04
Currency-neutral adjusted guidance *
(2)%-0%
~(4)%
(3)%-(4)%
Absence of results from divested businesses
~4%
 
 
53rd Week
(1)-(2)%
 
 
Organic guidance *
1-2%
 
 
* 2020 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 2020 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), commodities and certain foreign currency contracts. The Company is providing quantification of known adjustment items where available.

Reconciliation of Non-GAAP amounts - Cash Flow Guidance
 
(billions)
 
 
Full Year 2020
Net cash provided by (used in) operating activities
$1.5-$1.6
Additions to properties
~($0.6)
Cash Flow
$0.9-$1.0
Forward-Looking Statements Disclosure
This news release contains, or incorporates by reference, “forward-looking statements” with projections concerning, among other things, the Company’s restructuring programs, the integration of acquired businesses, the Company’s strategy, and the Company’s sales, earnings, margin, operating profit, costs and expenditures, interest expense, tax rate, capital expenditure, dividends, cash flow, debt reduction, share repurchases, costs, charges, rates of return, brand building, ROIC, working capital, growth, new products, innovation, cost reduction projects, workforce reductions, savings, and competitive pressures. Forward looking statements include predictions of future results or activities and may contain the words “expects,” “believes,” “should,” “will,” “anticipates,” “projects,” “estimates,” “implies,” “can,” or words or

                            8



phrases of similar meaning. The Company’s actual results or activities may differ materially from these predictions. The Company’s future results could also be affected by a variety of factors, including the expected benefits and costs of the divestiture of selected cookies, fruit and fruit flavored-snacks, pie crusts, and ice-cream cones businesses of the Company, the risk that disruptions from the divestiture will divert management's focus or harm the Company’s business, risks relating to any unforeseen changes to or effects on liabilities, future capital expenditures, revenues, expenses, earnings, synergies, indebtedness, financial condition, losses and future prospects, risks associated with the Company’s provision of transition services to the divested businesses post-closing, the ability to implement restructurings as planned, whether the expected amount of costs associated with restructurings will differ from forecasts, whether the Company will be able to realize the anticipated benefits from restructurings 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 other items.

Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.
Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to update them publicly.
[Kellogg Company Financial News]



                            9



Kellogg Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(millions, except per share data)
 
 
 
Quarter ended
 
Year ended
(Results are unaudited)
 
December 28,
2019
 
December 29,
2018
 
December 28,
2019
 
December 29,
2018
Net sales
 
$
3,223

 
$
3,317

 
$
13,578

 
$
13,547

Cost of goods sold
 
2,135

 
2,228

 
9,197

 
8,821

Selling, general and administrative expense
 
728

 
763

 
2,980

 
3,020

Operating profit
 
360

 
326

 
1,401

 
1,706

Interest expense
 
63

 
74

 
284

 
287

Other income (expense), net
 
(59
)
 
(359
)
 
188

 
(90
)
Income before income taxes
 
238

 
(107
)
 
1,305

 
1,329

Income taxes
 
84

 
(25
)
 
321

 
181

Earnings (loss) from unconsolidated entities
 
(2
)
 

 
(7
)
 
196

Net income (loss)
 
$
152

 
$
(82
)
 
$
977

 
$
1,344

Net income (loss) attributable to noncontrolling interests
 
7

 
2

 
17

 
8

Net income (loss) attributable to Kellogg Company
 
$
145

 
$
(84
)
 
$
960

 
$
1,336

Per share amounts:
 
 
 
 
 
 
 
 
Basic earnings
 
$
0.43

 
$
(0.24
)
 
$
2.81

 
$
3.85

Diluted earnings
 
$
0.42

 
$
(0.24
)
 
$
2.80

 
$
3.83

Average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
341

 
346

 
341

 
347

Diluted
 
343

 
348

 
343

 
348

Actual shares outstanding at period end
 
 
 
 
 
342

 
344






                            10



Kellogg Company and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(millions)
 
 
Year ended
(unaudited)
 
December 28,
2019
 
December 29,
2018
Operating activities
 
 
 
 
Net income
 
$
977

 
$
1,344

Adjustments to reconcile net income to operating cash flows:
 
 
 
 
Depreciation and amortization
 
484

 
516

Postretirement benefit plan expense (benefit)
 
(89
)
 
170

Deferred income taxes
 
47

 
46

Stock compensation
 
56

 
59

Gain from unconsolidated entities, net
 

 
(200
)
Multi-employer pension plan exit liability
 
132

 

Noncurrent income taxes payable
 
(35
)
 
(23
)
Other
 
(1
)
 
(40
)
Tax payment related to divestitures
 
(255
)
 

Postretirement benefit plan contributions
 
(28
)
 
(287
)
Changes in operating assets and liabilities, net of acquisitions:
 
 
 
 
Trade receivables
 
(145
)
 
76

Inventories
 
2

 
(86
)
Accounts payable
 
(9
)
 
115

All other current assets and liabilities
 
40

 
(154
)
Net cash provided by (used in) operating activities
 
1,176

 
1,536

Investing activities
 
 
 
 
Additions to properties
 
(586
)
 
(578
)
Purchases of available for sale securities
 
(18
)
 

Sales of available for sale securities
 
83

 

Divestiture
 
1,332

 

Acquisitions, net of cash acquired
 
(8
)
 
(28
)
Investments in unconsolidated entities
 

 
(389
)
Acquisition of cost method investments
 
(1
)
 
(8
)
Other
 
(28
)
 
55

Net cash provided by (used in) investing activities
 
774

 
(948
)
Financing activities
 
 
 
 
Net (reductions) of notes payable
 
(25
)
 
(225
)
Issuances of long-term debt
 
80

 
993

Reductions of long-term debt
 
(1,009
)
 
(408
)
Debt redemption costs
 
(17
)
 

Net issuances of common stock
 
64

 
167

Common stock repurchases
 
(220
)
 
(320
)
Cash dividends
 
(769
)
 
(762
)
Other
 
(9
)
 
(11
)
Net cash provided by (used in) financing activities
 
(1,905
)
 
(566
)
Effect of exchange rate changes on cash and cash equivalents
 
31

 
18

Increase (decrease) in cash and cash equivalents
 
76

 
40

Cash and cash equivalents at beginning of period
 
321

 
281

Cash and cash equivalents at end of period
 
397

 
321

Supplemental financial data:
 
 
 
 
Net cash provided by (used in) operating activities
 
$
1,176

 
$
1,536

Additions to properties
 
(586
)
 
(578
)
Cash Flow (operating cash flow less property additions) (a)
 
$
590

 
$
958



                            11



Kellogg Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(millions, except per share data)
 
 
December 28,
2019
 
December 29,
2018
 
 
(unaudited)
 
*
Current assets
 
 
 
 
Cash and cash equivalents
 
$
397

 
$
321

Accounts receivable, net
 
1,576

 
1,375

Inventories, net
 
1,226

 
1,330

Other current assets
 
232

 
131

Total current assets
 
3,431

 
3,157

Property, net
 
3,612

 
3,731

Operating lease right-of-use assets
 
541

 

Goodwill
 
5,861

 
6,050

Other intangibles, net
 
2,576

 
3,361

Investments in unconsolidated entities
 
404

 
413

Other assets
 
1,139

 
1,068

Total assets
 
$
17,564

 
$
17,780

Current liabilities
 
 
 
 
Current maturities of long-term debt
 
$
620

 
$
510

Notes payable
 
107

 
176

Accounts payable
 
2,387

 
2,427

Current operating lease liabilities
 
114

 

Other current liabilities
 
1,550

 
1,416

Total current liabilities
 
4,778

 
4,529

Long-term debt
 
7,195

 
8,207

Operating lease liabilities
 
433

 

Deferred income taxes
 
596

 
730

Pension liability
 
705

 
651

Other liabilities
 
543

 
504

Commitments and contingencies
 
 
 
 
Equity
 
 
 
 
Common stock, $.25 par value
 
105

 
105

Capital in excess of par value
 
921

 
895

Retained earnings
 
7,859

 
7,652

Treasury stock, at cost
 
(4,690
)
 
(4,551
)
Accumulated other comprehensive income (loss)
 
(1,448
)
 
(1,500
)
Total Kellogg Company equity
 
2,747

 
2,601

Noncontrolling interests
 
567

 
558

Total equity
 
3,314

 
3,159

Total liabilities and equity
 
$
17,564

 
$
17,780








                            12



Kellogg Company and Subsidiaries
Adjustments to Reconcile Reported Results to Currency-Neutral Adjusted Results
(millions, except per share data)

 
Quarter ended December 28, 2019
(Results are unaudited)
Cost of goods sold
Selling, general and administrative expense
Operating profit
Other income (expense)
Income taxes
Earnings (loss) from unconsolidated entities
Net income (loss) attributable to Kellogg
Per share amount: Diluted
Mark-to-market (pre-tax)
$
(3
)
$
2

$
1

$
(119
)
$

$

$
(118
)
$
(0.34
)
Project K (pre-tax)
5

11

(16
)



(16
)
(0.05
)
Brexit impacts (pre-tax)
2


(2
)



(2
)
(0.01
)
Business and portfolio realignment (pre-tax)
6

20

(26
)
5



(21
)
(0.06
)
Multi-employer pension plan exit liability (pre-tax)








Gain on divestiture (pre-tax)








Income tax impact applicable to adjustments, net*




29


29

0.09

Out-of-period adjustment




(39
)

(39
)
(0.12
)
Foreign currency impact
1

(3
)
1




1


Adjustments to adjusted basis
$
11

$
30

$
(42
)
$
(114
)
$
(10
)
$

$
(166
)
$
(0.49
)
 
 
 
 
 
 
 
 
 
 
Quarter ended December 29, 2018
(Results are unaudited)
Cost of goods sold
Selling, general and administrative expense
Operating profit
Other income (expense)
Income taxes
Earnings (loss) from unconsolidated entities
Net income (loss) attributable to Kellogg
Per share amount: Diluted
Mark-to-market (pre-tax)
$
16

$
(1
)
$
(15
)
$
(397
)
$

$

$
(412
)
$
(1.19
)
Project K (pre-tax)
41

43

(84
)



(84
)
(0.24
)
Brexit impacts (pre-tax)
2

1

(3
)



(3
)
(0.01
)
Business and portfolio realignment (pre-tax)

5

(5
)



(5
)
(0.01
)
Income tax impact applicable to adjustments, net*




(108
)

108

0.31

Adoption of U.S. Tax Reform




5


(5
)
(0.01
)
Gain from unconsolidated entities, net








Adjustments to adjusted basis
$
59

$
48

$
(107
)
$
(397
)
$
(103
)
$

$
(401
)
$
(1.15
)
Note: Tables may not foot due to rounding.
*Represents the estimated tax effect on the reconciling items, using weighted-average statutory tax rates, depending upon the applicable jurisdiction.
For more information on the reconciling items in the table above, please refer to the Significant items impacting comparability section.

                            13



Kellogg Company and Subsidiaries
Adjustments to Reconcile Reported Results to Currency-Neutral Adjusted Results
(millions, except per share data)

 
Year ended December 28, 2019
(Results are unaudited)
Cost of goods sold
Selling, general and administrative expense
Operating profit
Other income (expense)
Income taxes
Earnings (loss) from unconsolidated entities
Net income (loss) attributable to Kellogg
Per share amount: Diluted
Mark-to-market (pre-tax)
$
4

$
2

$
(7
)
$
(98
)
$

$

$
(104
)
$
(0.30
)
Project K (pre-tax)
35

19

(54
)



(54
)
(0.15
)
Brexit impacts (pre-tax)
9


(9
)



(9
)
(0.02
)
Business and portfolio realignment (pre-tax)
17

144

(161
)
5



(156
)
(0.46
)
Multi-employer pension plan exit liability (pre-tax)
132


(132
)



(132
)
(0.39
)
Gain on divestiture (pre-tax)



55



55

0.16

Income tax impact applicable to adjustments, net*




50


50

0.14

Out-of-period adjustment




(39
)

(39
)
(0.12
)
Foreign currency impact
(158
)
(50
)
(23
)
(2
)
2


(22
)
(0.06
)
Adjustments to adjusted basis
$
39

$
115

$
(386
)
$
(40
)
$
13

$

$
(412
)
$
(1.20
)
 
 
 
 
 
 
 
 
 
 
Year ended December 29, 2018
(Results are unaudited)
Cost of goods sold
Selling, general and administrative expense
Operating profit
Other income (expense)
Income taxes
Earnings (loss) from unconsolidated entities
Net income (loss) attributable to Kellogg
Per share amount: Diluted
Mark-to-market (pre-tax)
$
(6
)
$
(1
)
$
7

$
(350
)
$

$

$
(343
)
$
(0.98
)
Project K (pre-tax)
99

74

(173
)
30



(143
)
(0.41
)
Brexit impacts (pre-tax)
2

1

(3
)



(3
)
(0.01
)
Business and portfolio realignment (pre-tax)

5

(5
)



(5
)
(0.01
)
Income tax impact applicable to adjustments, net*




(109
)

109

0.30

Adoption of U.S. Tax Reform




(11
)

11

0.04

Gain from unconsolidated entities, net





200

200

0.57

Adjustments to adjusted basis
$
95

$
79

$
(174
)
$
(320
)
$
(120
)
$
200

$
(174
)
$
(0.50
)
Note: Tables may not foot due to rounding.
*Represents the estimated tax effect on the reconciling items, using weighted-average statutory tax rates, depending upon the applicable jurisdiction.
For more information on the reconciling items in the table above, please refer to the Significant items impacting comparability section.


                            14



Kellogg Company and Subsidiaries
Reconciliation of Non-GAAP Amounts - Reported Net Sales to Organic Net Sales

Quarter ended December 28, 2019
 
 
 
 
 
 
 
 
 
 
 
(millions)
 
North America
 
Europe
 
Latin
America
 
AMEA
 
Corporate
 
Kellogg
Consolidated
Reported net sales
 
$
1,894

 
$
526

 
$
233

 
$
570

 
$

 
$
3,223

Foreign currency impact on total business (inc)/dec
 
2

 
(1
)
 
(3
)
 
1

 

 
(1
)
Organic net sales
 
$
1,892

 
$
527

 
$
235

 
$
569

 
$

 
$
3,224

 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter ended December 29, 2018
 
 
 
 
 
 
 
 
 
 
 
(millions)
 
North America
 
Europe
 
Latin
America
 
AMEA
 
Corporate
 
Kellogg
Consolidated
Reported net sales
 
$
2,043

 
$
512

 
$
237

 
$
525

 
$

 
$
3,317

Divestitures
 
175

 

 
2

 

 

 
176

Organic net sales
 
$
1,868

 
$
512

 
$
235

 
$
525

 
$

 
$
3,141

 
 
 
 
 
 
 
 
 
 
 
 
 
% change - 2019 vs. 2018:
 
 
 
 
 
 
 
 
 
 
 
Reported growth
 
(7.3
)%
 
2.9
 %
 
(1.6
)%
 
8.4
%
 
%
 
(2.8
)%
Foreign currency impact on total business (inc)/dec
 
0.1
 %
 
(0.2
)%
 
(1.1
)%
 
0.1
%
 
%
 
 %
Currency-neutral growth
 
(7.4
)%
 
3.1
 %
 
(0.5
)%
 
8.3
%
 
%
 
(2.8
)%
Acquisitions
 
 %
 
 %
 
 %
 
%
 
%
 
 %
Divestitures
 
(8.7
)%
 
 %
 
(0.9
)%
 
%
 
%
 
(5.5
)%
Foreign currency impact on acquisitions and divestitures (inc)/dec
 
 %
 
 %
 
 %
 
%
 
%
 
 %
Organic growth
 
1.3
 %
 
3.1
 %
 
0.4
 %
 
8.3
%
 
%
 
2.7
 %
Volume (tonnage)
 
(1.2
)%
 
0.6
 %
 
(0.7
)%
 
6.5
%
 
%
 
1.2
 %
Pricing/mix
 
2.5
 %
 
2.5
 %
 
1.1
 %
 
1.8
%
 
%
 
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.

                            15



Kellogg Company and Subsidiaries
Reconciliation of Non-GAAP Amounts - Reported Net Sales to Organic Net Sales

Year ended December 28, 2019
 
 
 
 
 
 
 
 
 
 
 
 
(millions)
 
North America
 
Europe
 
Latin
America
 
AMEA
 
Corporate
 
Kellogg
Consolidated
Reported net sales
 
$
8,390

 
$
2,092

 
$
940

 
$
2,156

 
$

 
$
13,578

Foreign currency impact on total business (inc)/dec
 
(11
)
 
(101
)
 
(33
)
 
(87
)
 

 
(231
)
Currency-neutral net sales
 
$
8,400

 
$
2,193

 
$
973

 
$
2,243

 
$

 
$
13,810

Acquisitions
 

 

 

 
271

 

 
271

Foreign currency impact on acquisitions (inc)/dec
 

 

 

 
49

 

 
49

Organic net sales
 
$
8,400

 
$
2,193

 
$
973

 
$
1,922

 
$

 
$
13,489

 
 
 
 
 
 
 
 
 
 
 
 
 
Year ended December 29, 2018
 
 
 
 
 
 
 
 
 
 
 
 
(millions)
 
North America
 
Europe
 
Latin
America
 
AMEA
 
Corporate
 
Kellogg
Consolidated
Reported net sales
 
$
8,688

 
$
2,122

 
$
947

 
$
1,790

 
$

 
$
13,547

Divestitures
 
305

 

 
4

 

 

 
308

Organic net sales
 
$
8,383

 
$
2,122

 
$
943

 
$
1,790

 
$

 
$
13,239

 
 
 
 
 
 
 
 
 
 
 
 
 
% change - 2019 vs. 2018:
 
 
 
 
 
 
 
 
 
 
 
 
Reported growth
 
(3.4
)%
 
(1.4
)%
 
(0.7
)%
 
20.4
 %
 
%
 
0.2
 %
Foreign currency impact on total business (inc)/dec
 
(0.1
)%
 
(4.7
)%
 
(3.5
)%
 
(4.9
)%
 
%
 
(1.7
)%
Currency-neutral growth
 
(3.3
)%
 
3.3
 %
 
2.8
 %
 
25.3
 %
 
%
 
1.9
 %
Acquisitions
 
 %
 
 %
 
 %
 
15.2
 %
 
%
 
2.0
 %
Divestitures
 
(3.5
)%
 
 %
 
(0.4
)%
 
 %
 
%
 
(2.4
)%
Foreign currency impact on acquisitions/divestitures (inc)/dec
 
 %
 
 %
 
 %
 
2.7
 %
 
%
 
0.4
 %
Organic growth
 
0.2
 %
 
3.3
 %
 
3.2
 %
 
7.4
 %
 
%
 
1.9
 %
Volume (tonnage)
 
(1.8
)%
 
1.7
 %
 
 %
 
2.2
 %
 
%
 
(0.2
)%
Pricing/mix
 
2.0
 %
 
1.6
 %
 
3.2
 %
 
5.2
 %
 
%
 
2.1
 %
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.




                            16



Kellogg Company and Subsidiaries
Reconciliation of Non-GAAP Amounts - Reported Gross Profit to Currency-Neutral Adjusted Gross Profit

 
 
Quarter ended
 
Year ended
(millions)
 
December 28,
2019
 
December 29,
2018
 
December 28,
2019
 
December 29,
2018
Reported gross profit
 
$
1,088

 
$
1,089

 
$
4,381

 
$
4,726

Mark-to-market
 
3

 
(16
)
 
(4
)
 
6

Project K
 
(5
)
 
(41
)
 
(35
)
 
(99
)
Brexit impacts
 
(2
)
 
(2
)
 
(9
)
 
(2
)
Business and portfolio realignment
 
(6
)
 

 
(17
)
 

Multi-employer pension plan exit liability
 

 

 
(132
)
 

Foreign currency impact
 
(2
)
 

 
(73
)
 

Currency-neutral adjusted gross profit
 
$
1,100

 
$
1,148

 
$
4,651

 
$
4,821

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.









Kellogg Company and Subsidiaries
Reconciliation of Non-GAAP Amounts - Reported Gross Margin to Currency-Neutral Adjusted Gross Margin

 
 
Quarter ended
 
Year ended
 
 
December 28,
2019
 
December 29,
2018
 
Increase/(Decrease)
 
December 28,
2019
 
December 29,
2018
 
Increase/(Decrease)
Reported gross margin
 
33.8
 %
 
32.8
 %
 
1.0
 %
 
32.3
 %
 
34.9
 %
 
(2.6
)%
Mark-to-market
 
0.1
 %
 
(0.5
)%
 
0.6
 %
 
 %
 
0.1
 %
 
(0.1
)%
Project K
 
(0.1
)%
 
(1.2
)%
 
1.1
 %
 
(0.3
)%
 
(0.8
)%
 
0.5
 %
Brexit impacts
 
(0.1
)%
 
(0.1
)%
 
 %
 
 %
 
 %
 
 %
Business and portfolio realignment
 
(0.2
)%
 
 %
 
(0.2
)%
 
(0.1
)%
 
 %
 
(0.1
)%
Multi-employer pension plan exit liability
 
 %
 
 %
 
 %
 
(1.0
)%
 
 %
 
(1.0
)%
Foreign currency impact
 
 %
 
 %
 
 %
 
 %
 
 %
 
 %
Currency-neutral adjusted gross margin
 
34.1
 %
 
34.6
 %
 
(0.5
)%
 
33.7
 %
 
35.6
 %
 
(1.9
)%
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.

                            17



Kellogg Company and Subsidiaries
Reconciliation of Non-GAAP Amounts - Reported Operating Profit to Currency-Neutral Adjusted Operating Profit

Quarter ended December 28, 2019
 
 
 
 
 
 
 
 
 
 
 
(millions)
 
North America
 
Europe
 
Latin
America
 
AMEA
 
Corporate*
 
Kellogg
Consolidated
Reported operating profit
 
$
305

 
$
59

 
$
24

 
$
50

 
$
(77
)
 
$
360

Mark-to-market
 

 

 

 

 
1

 
1

Project K
 
(5
)
 
(1
)
 
(7
)
 

 
(3
)
 
(16
)
Brexit impacts
 

 
(2
)
 

 

 

 
(2
)
Business and portfolio realignment
 
(3
)
 
(11
)
 
(1
)
 
(8
)
 
(3
)
 
(26
)
Multi-employer pension plan exit liability
 

 

 

 

 

 

Adjusted operating profit
 
$
314

 
$
72

 
$
31

 
$
57

 
$
(71
)
 
$
403

Foreign currency impact
 

 
1

 

 
(1
)
 

 
1

Currency-neutral adjusted operating profit
 
$
313

 
$
71

 
$
31

 
$
58

 
$
(71
)
 
$
403

 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter ended December 29, 2018
 
 
 
 
 
 
 
 
 
 
 
(millions)
 
North America
 
Europe
 
Latin
America
 
AMEA
 
Corporate*
 
Kellogg
Consolidated
Reported operating profit
 
$
283

 
$
41

 
$
32

 
$
49

 
$
(79
)
 
$
326

Mark-to-market
 

 

 

 

 
(15
)
 
(15
)
Project K
 
(41
)
 
(18
)
 
(8
)
 
(13
)
 
(4
)
 
(84
)
Brexit impacts
 

 
(3
)
 

 

 

 
(3
)
Business and portfolio realignment
 
(3
)
 

 

 

 
(2
)
 
(5
)
Adjusted operating profit
 
$
327

 
$
62

 
$
40

 
$
62

 
$
(58
)
 
$
433

 
 
 
 
 
 
 
 
 
 
 
 
 
% change - 2019 vs. 2018:
 
 
 
 
 
 
 
 
 
 
 
Reported growth
 
7.7
 %
 
42.7
 %
 
(27.1
)%
 
2.2
 %
 
3.3
 %
 
10.5
 %
Mark-to-market
 
 %
 
 %
 
 %
 
 %
 
23.2
 %
 
5.0
 %
Project K and cost reduction activities
 
12.1
 %
 
43.4
 %
 
(3.5
)%
 
22.0
 %
 
1.1
 %
 
17.1
 %
Brexit impacts
 
 %
 
1.1
 %
 
 %
 
0.4
 %
 
 %
 
0.2
 %
Business and portfolio realignment
 
0.2
 %
 
(17.7
)%
 
(3.7
)%
 
(12.2
)%
 
(1.8
)%
 
(5.0
)%
Multi-employer pension plan exit liability
 
 %
 
 %
 
 %
 
 %
 
 %
 
 %
Adjusted growth
 
(4.6
)%
 
15.9
 %
 
(19.9
)%
 
(8.0
)%
 
(19.2
)%
 
(6.8
)%
Foreign currency impact
 
 %
 
1.2
 %
 
1.2
 %
 
(1.4
)%
 
0.1
 %
 
0.1
 %
Currency-neutral adjusted growth
 
(4.6
)%
 
14.7
 %
 
(21.1
)%
 
(6.6
)%
 
(19.3
)%
 
(6.9
)%
Note: Tables may not foot due to rounding.
* Corporate in 2019 includes the cost of certain global research and development activities that were previously included in the North America reportable segment in 2018 that totaled approximately $12 million.
For more information on the reconciling items in the table above, please refer to the Significant items impacting comparability section.



                            18



Kellogg Company and Subsidiaries
Reconciliation of Non-GAAP Amounts - Reported Operating Profit to Currency-Neutral Adjusted Operating Profit
Year ended December 28, 2019
 
 
 
 
 
 
 
 
 
 
 
(millions)
 
North America
 
Europe
 
Latin
America
 
AMEA
 
Corporate*
 
Kellogg
Consolidated
Reported operating profit
 
$
1,215

 
$
223

 
$
85

 
$
195

 
$
(316
)
 
$
1,401

Mark-to-market
 

 

 

 

 
(7
)
 
(7
)
Project K
 
(29
)
 
(3
)
 
(15
)
 
(4
)
 
(4
)
 
(54
)
Brexit impacts
 

 
(9
)
 

 

 

 
(9
)
Business and portfolio realignment
 
(58
)
 
(46
)
 
(4
)
 
(12
)
 
(42
)
 
(161
)
Multi-employer pension plan exit liability
 
(132
)
 

 

 

 

 
(132
)
Adjusted operating profit
 
$
1,434

 
$
280

 
$
104

 
$
211

 
$
(264
)
 
$
1,764

Foreign currency impact
 
(1
)
 
(13
)
 
(1
)