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)



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

For the quarterly period ended March ~~30, 2019~~28, 2020



¨☐	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~~

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~~ x 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~~ x 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~~ x State of Incorporation—	~~Accelerated filer~~ ¨ Delaware	~~Non-accelerated filer~~ ¨	~~Smaller reporting company~~ ¨ IRS Employer Identification No.	~~Emerging growth company~~ o 38-0710690

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. ¨One Kellogg Square, P.O. Box 3599, Battle Creek, MI49016-3599

~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).~~Registrant’s telephone number: 269-961-2000

~~Yes~~ ¨ No x

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

Yes☒ No ☐



Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company	☐

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 ~~April 27, 2019~~March 28, 2020 — ~~340,496,962~~342,670,027 shares

KELLOGG COMPANY

INDEX



		Page
	PART I — Financial Information
	Item 1:
	Financial Statements
	Consolidated Balance Sheet — March ~~30, 2019~~28, 2020 and December ~~29, 2018~~28, 2019	3
	Consolidated Statement of Income — quarters ended March ~~30, 2019~~28, 2020 and March ~~31, 2018~~30, 2019	4
	Consolidated Statement of Comprehensive Income – quarters ended March ~~30, 2019~~28, 2020 and March ~~31, 2018~~30, 2019	5
	Consolidated Statement of Equity — ~~quarters~~quarter ended March ~~31, 2018 and March 30, 2019~~28, 2020	6
	Consolidated Statement of Equity — quarter ended March 30, 2019	6
	Consolidated Statement of Cash Flows — quarters ended March ~~30, 2019~~28, 2020 and March ~~31, 2018~~30, 2019	7
	Notes to Consolidated Financial Statements	8
	Item 2:
	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2724
	Item 3:
	Quantitative and Qualitative Disclosures about Market Risk	40
	Item 4:
	Controls and Procedures	4140
	PART II — Other Information
	~~Item 1:~~
	~~Legal Proceedings~~	42
	Item 1A:
	Risk Factors	4241
	Item 2:
	Unregistered Sales of Equity Securities and Use of Proceeds	4342
	Item 6:
	Exhibits	43
	Signatures	44
	Exhibit Index	45

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Kellogg Company and Subsidiaries

CONSOLIDATED BALANCE SHEET

(millions, except per share data)



	March 28, 2020 (unaudited)			December 28, 2019
Current assets
Cash and cash equivalents	$	1,016		$	397
Accounts receivable, net	1,748			1,576
Inventories	1,189			1,226
Other current assets	337			232
Total current assets	4,290			3,431
Property, net	3,440			3,612
Operating lease right-of-use assets	596			541
Goodwill	5,772			5,861
Other intangibles, net	2,503			2,576
Investments in unconsolidated entities	402			404
Other assets	1,237			1,139
Total assets	$	18,240		$	17,564
Current liabilities
Current maturities of long-term debt	$	626		$	620
Notes payable	657			107
Accounts payable	2,329			2,387
Current operating lease liabilities	112			114
Accrued advertising and promotion	672			641
Other current liabilities	1,199			909
Total current liabilities	5,595			4,778
Long-term debt	7,163			7,195
Operating lease liabilities	474			433
Deferred income taxes	592			596
Pension liability	689			705
Other liabilities	515			543
Commitments and contingencies
Equity
Common stock, $.25 par value	105			105
Capital in excess of par value	911			921
Retained earnings	8,010			7,859
Treasury stock, at cost	(4,625		)	(4,690		)
Accumulated other comprehensive income (loss)	(1,727		)	(1,448		)
Total Kellogg Company equity	2,674			2,747
Noncontrolling interests	538			567
Total equity	3,212			3,314
Total liabilities and equity	$	18,240		$	17,564

March 30,
2019 (unaudited) December 29,
2018
Current assets
Cash and cash equivalents $ 272
$ 321
Accounts receivable, net 1,633
1,375
Inventories 1,319
1,330
Other current assets 149
131
Total current assets 3,373
3,157
Property, net 3,733
3,731
Operating lease right-of-use assets 438
—
Goodwill 6,054
6,050
Other intangibles, net 3,349
3,361
Investments in unconsolidated entities 410
413
Other assets 1,108
1,068
Total assets $ 18,465
$ 17,780
Current liabilities
Current maturities of long-term debt $ 509
$ 510
Notes payable 605
176
Accounts payable 2,370
2,427
Current operating lease liabilities 108
—
Other current liabilities 1,386
1,416
Total current liabilities 4,978
4,529
Long-term debt 8,183
8,207
Operating lease liabilities 339
—
Deferred income taxes 755
730
Pension liability 630
651
Other liabilities 483
504
Commitments and contingencies

Equity
Common stock, $.25 par value 105
105
Capital in excess of par value 877
895
Retained earnings 7,762
7,652
Treasury stock, at cost (4,744 ) (4,551 )
Accumulated other comprehensive income (loss) (1,467 ) (1,500 )
Total Kellogg Company equity 2,533
2,601
Noncontrolling interests 564
558
Total equity 3,097
3,159
Total liabilities and equity $ 18,465
$ 17,780

See accompanying Notes to Consolidated Financial Statements.

Kellogg Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

(millions, except per share data)



	Quarter ended
(unaudited)	March 28, 2020			March 30, 2019
Net sales	$	3,412		$	3,522
Cost of goods sold	2,268			2,415
Selling, general and administrative expense	685			726
Operating profit	459			381
Interest expense	64			74
Other income (expense), net	51			52
Income before income taxes	446			359
Income taxes	94			72
Earnings (loss) from unconsolidated entities	(2		)	(2		)
Net income	350			285
Net income attributable to noncontrolling interests	3			3
Net income attributable to Kellogg Company	$	347		$	282
Per share amounts:
Basic earnings	$	1.01		$	0.82
Diluted earnings	$	1.01		$	0.82
Average shares outstanding:
Basic	342			342
Diluted	344			343
Actual shares outstanding at period end	343			340

Quarter ended
(Results are unaudited) March 30,
2019 March 31,
2018
Net sales $ 3,522
$ 3,401
Cost of goods sold 2,415
2,149
Selling, general and administrative expense 726
742
Operating profit 381
510
Interest expense 74
69
Other income (expense), net 52
70
Income before income taxes 359
511
Income taxes 72
67
Earnings (loss) from unconsolidated entities (2 ) —
Net income 285
444
Net income attributable to noncontrolling interests 3
—
Net income attributable to Kellogg Company $ 282
$ 444
Per share amounts:
Basic earnings $ 0.82
$ 1.28
Diluted earnings $ 0.82
$ 1.27
Average shares outstanding:
Basic 342
346
Diluted 343
348
Actual shares outstanding at period end 340
347

See accompanying Notes to Consolidated Financial Statements.

Kellogg Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(millions)



	Quarter ended March 28, 2020
(unaudited)	Pre-tax amount			Tax (expense) benefit			After-tax amount
Net income							$	350
Other comprehensive income (loss):
Foreign currency translation adjustments:
Foreign currency translation adjustments during period	$	(241	)	$	(20	)	(261		)
Cash flow hedges:
Unrealized gain (loss)	(65		)	17			(48		)
Reclassification to net income	2			—			2
Postretirement and postemployment benefits:
Reclassification to net income:
Net experience (gain) loss	(1		)	—			(1		)
Available-for-sale securities:
Unrealized gain (loss)	(3		)	—			(3		)
Other comprehensive income (loss)	$	(308	)	$	(3	)	$	(311	)
Comprehensive income							$	39
Net Income attributable to noncontrolling interests							3
Other comprehensive income (loss) attributable to noncontrolling interests							(32		)
Comprehensive income attributable to Kellogg Company							$	68

	Quarter ended March 30, 2019
(unaudited)	Pre-tax amount			Tax (expense) benefit			After-tax amount
Net income							$	285
Other comprehensive income (loss):
Foreign currency translation adjustments	$	66		$	(10	)	56
Cash flow hedges:
Reclassification to net income	1			—			1
Postretirement and postemployment benefits:
Reclassification to net income:
Net experience (gain) loss	(1		)	—			(1		)
Available-for-sale securities:
Unrealized gain (loss)	2			—			2
Other comprehensive income (loss)	$	68		$	(10	)	$	58
Comprehensive income							$	343
Net Income attributable to noncontrolling interests							3
Other comprehensive income (loss) attributable to noncontrolling interests							3
Comprehensive income attributable to Kellogg Company							$	337

Quarter ended
March 30, 2019
(Results are unaudited) Pre-tax
amount Tax (expense)
benefit After-tax
amount
Net income $ 285
Other comprehensive income (loss):
Foreign currency translation adjustments:
Foreign currency translation adjustments during period $ 66
$ (10 ) 56
Cash flow hedges:
Reclassification to net income 1
—
1
Postretirement and postemployment benefits:
Reclassification to net income:
Net experience (gain) loss (1 ) —
(1 )
Unrealized gain (loss) on available-for-sale securities 2
—
2
Other comprehensive income (loss) $ 68
$ (10 ) $ 58
Comprehensive income $ 343
Net Income (loss) attributable to noncontrolling interests

3
Other comprehensive income (loss) attributable to noncontrolling interests 3
Comprehensive income attributable to Kellogg Company $ 337

Quarter ended
March 31, 2018
(Results are unaudited) Pre-tax
amount Tax (expense)
benefit After-tax
amount
Net income $ 444
Other comprehensive income (loss):
Foreign currency translation adjustments $ 30
$ 19
49
Cash flow hedges:
Reclassification to net income 2
—
2
Postretirement and postemployment benefits:
Reclassification to net income:
Net experience (gain) loss (1 ) —
(1 )
Other comprehensive income (loss) $ 31
$ 19
$ 50
Comprehensive income $ 494
Net Income (loss) attributable to noncontrolling interests —
Other comprehensive income (loss) attributable to noncontrolling interests —
Comprehensive income attributable to Kellogg Company $ 494

See accompanying Notes to Consolidated Financial Statements.

Kellogg Company and Subsidiaries

CONSOLIDATED STATEMENT OF EQUITY

(millions)


	Quarter ended March 30, 2019																									Quarter ended March 28, 2020
	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)	shares	amount								shares		amount														shares	amount								shares		amount
Balance, December 29, 2018	421	$	105	$	895		$	7,652		77		$	(4,551	)	$	(1,500	)	$	2,601		$	558	$	3,159
Common stock repurchases										4		(220		)				(220		)			(220		)
Balance, December 28, 2019																										421	$	105	$	921		$	7,859		79		$	(4,690	)	$	(1,448	)	$	2,747		$	567		$	3,314
Net income							282											282			3		285									347											347			3			350
Dividends declared ($0.56 per share)							(192		)									(192		)			(192		)
Other comprehensive income															55			55			3		58
Reclassification of tax effects relating to U.S. tax reform							22								(22		)	—					—
Stock compensation				13														13					13
Stock options exercised and other				(31		)	(2		)	(1	)	27						(6		)			(6		)
Balance, March 30, 2019	421	$	105	$	877		$	7,762		80		$	(4,744	)	$	(1,467	)	$	2,533		$	564	$	3,097

	Quarter ended March 31, 2018
	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)	shares	amount								shares		amount
Balance, December 30, 2017	421	$	105	$	878		$	7,069		75		$	(4,417	)	$	(1,457	)	$	2,178		$	16	$	2,194
Net income							444											444					444
Dividends declared ($0.54 per share)							(187		)									(187		)			(187		)
Dividends declared ($0.57 per share)																																(195		)									(195		)				(195		)
Other comprehensive income															50			50					50																	(279		)	(279		)	(32		)	(311		)
Stock compensation				16														16					16						19														19						19
Stock options exercised and other				(42		)	8			(1	)	71						37					37						(29		)	(1		)	(1	)	65						35						35
Balance, March 31, 2018	421	$	105	$	852		$	7,334		74		$	(4,346	)	$	(1,407	)	$	2,538		$	16	$	2,554
Balance, March 28, 2020																										421	$	105	$	911		$	8,010		78		$	(4,625	)	$	(1,727	)	$	2,674		$	538		$	3,212

~~The accrual balance for tax-related interest was approximately $22 million at March 30, 2019.~~

Note 11 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 March ~~30, 2019~~28, 2020 and December ~~29, 2018~~28, 2019 were as follows:



(millions)	March 28, 2020		December 28, 2019
Foreign currency exchange contracts	$	3,374	$	2,628
Cross-currency contracts	1,529		1,540
Interest rate contracts	2,143		1,871
Commodity contracts	527		524
Total	$	7,573	$	6,563

(millions) March 30,
2019 December 29,
2018
Foreign currency exchange contracts $ 2,371
$ 1,863
Cross-currency contracts 1,372
1,197
Interest rate contracts 1,646
1,608
Commodity contracts 535
417
Total $ 5,924
$ 5,085

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 March ~~30, 2019~~28, 2020 and December ~~29, 2018,~~28, 2019, 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 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 March ~~30, 2019~~28, 2020 or December ~~29, 2018.~~28, 2019.

The following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheet on a recurring basis as of March ~~30, 2019~~28, 2020 and December ~~29, 2018:~~28, 2019:

Derivatives designated as hedging instruments



	March 28, 2020								December 28, 2019
(millions)	Level 1		Level 2			Total			Level 1		Level 2			Total
Assets:
Cross-currency contracts:
Other current assets	$	—	$	75		$	75		$	—	$	45		$	45
Other assets	—		73			73			—		40			40
Interest rate contracts:
Other current assets	—		—			—			—		7			7
Other assets (a)	—		6			6			—		4			4
Total assets	$	—	$	154		$	154		$	—	$	96		$	96
Liabilities:
Interest rate contracts:
Other current liabilities	$	—	$	(58	)	$	(58	)	$	—	$	(4	)	$	(4	)
Other liabilities	—		(5		)	(5		)	—		—			—
Total liabilities	$	—	$	(63	)	$	(63	)	$	—	$	(4	)	$	(4	)

March 30, 2019 December 29, 2018
(millions) Level 1 Level 2 Total Level 1 Level 2 Total
Assets:
Cross-currency contracts:
Other assets $ —
$ 71
$ 71
$ —
$ 79
$ 79
Interest rate contracts:

Other assets (a) —
35
35
—
17
17
Total assets $ —
$ 106
$ 106

$ —
$ 96
$ 96
Liabilities:

Interest rate contracts:

Other liabilities (a) —
(15 ) (15 ) —
(22 ) (22 )
Total liabilities $ —
$ (15 ) $ (15 )
$ —
$ (22 ) $ (22 )

(a) The fair value of the related hedged portion of the Company's long-term debt, a level 2 liability, was ~~$1.7 billion and $1.6~~$0.7 billion as of March ~~30, 2019~~28, 2020 and December ~~29, 2018, respectively.~~28, 2019.

Derivatives not designated as hedging instruments



	March 28, 2020									December 28, 2019
(millions)	Level 1			Level 2			Total			Level 1			Level 2			Total
Assets:
Foreign currency exchange contracts:
Other current assets	$	—		$	74		$	74		$	—		$	12		$	12
Other assets	—			7			7			—			—			—
Commodity contracts:
Other current assets	5			—			5			9			—			9
Total assets	$	5		$	81		$	86		$	9		$	12		$	21
Liabilities:
Foreign currency exchange contracts:
Other current liabilities	$	—		$	(34	)	$	(34	)	$	—		$	(18	)	$	(18	)
Other liabilities	—			(1		)	(1		)	—			—			—
Interest rate contracts:
Other liabilities	—			(13		)	(13		)	—			(13		)	(13		)
Commodity contracts:
Other current liabilities	(7		)	—			(7		)	(1		)	—			(1		)
Total liabilities	$	(7	)	$	(48	)	$	(55	)	$	(1	)	$	(31	)	$	(32	)

March 30, 2019 December 29, 2018
(millions) Level 1 Level 2 Total Level 1 Level 2 Total
Assets:
Foreign currency exchange contracts:
Other current assets $ —
$ 11
$ 11
$ —
$ 3
$ 3
Commodity contracts:
Other current assets 3
—
3
3
—
3
Total assets $ 3
$ 11
$ 14

$ 3
$ 3
$ 6
Liabilities:
Foreign currency exchange contracts:
Other current liabilities $ —
$ (17 ) $ (17 ) $ —
$ (4 ) $ (4 )
Commodity contracts:
Other current liabilities (13 ) —
(13 ) (9 ) —
(9 )
Total liabilities $ (13 ) $ (17 ) $ (30 )
$ (9 ) $ (4 ) $ (13 )

The Company has designated its outstanding foreign currency denominated long-term 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 was approximately $2.6 billion as of March ~~30, 2019~~28, 2020 and December ~~29, 2018.~~28, 2019.

The following amounts were recorded on the Consolidated Balance Sheet related to cumulative basis adjustments for existing fair value hedges as of March ~~30, 2019~~28, 2020 and December ~~29, 2018.~~28, 2019.


(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)					Line Item in the Consolidated Balance Sheet in which the hedged item is included	Carrying amount of the hedged liabilities				Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged liabilities (a)
		March 30, 2019		December 29, 2018		March 30, 2019		December 29, 2018				March 28, 2020		December 28, 2019		March 28, 2020		December 28, 2019
Interest rate contracts	Current maturities of long-term debt	$	502	$	503	$	2	$	3		Current maturities of long-term debt	$	493	$	493	$	—	$	—
Interest rate contracts	Long-term debt	$	3,354	$	3,354	$	7	$	(18	)	Long-term debt	$	2,790	$	2,643	$	20	$	19

~~Adjusted: operating profit, net income, and diluted EPS:~~ ~~We adjust the GAAP financial measures to exclude the effect of restructuring and cost reduction activities,~~

•

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 selected cookies, fruit snacks, pie crusts, and ice cream cone businesses, 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.

•

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 selected cookies, fruit snacks, pie crusts, and ice cream cone businesses, 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 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, as well as to evaluate the impacts of inflationary pressures and decisions to invest in new initiatives within each of our segments.~~

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 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 and the related tax effect of those items 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.

•

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

~~Currency-neutral adjusted: gross profit, gross margin, operating profit, net income, and diluted EPS:~~ We adjust the GAAP financial measures to exclude the effect of restructuring and cost reduction activities, 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, 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.

•

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.

~~Adjusted effective income tax rate:~~ We adjust the GAAP financial measures to exclude the effect of restructuring and cost reduction activities, 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, 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. 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.

Significant items impacting comparability

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

We recognize mark-to-market adjustments for pension plans, commodity contracts, and certain foreign currency contracts as incurred. Actuarial gains/losses for pension plans are recognized in the year they occur. Changes between contract and market prices for commodities 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 benefit of $12 million for the quarter ended March 28, 2020. Included within the aforementioned was a pre-tax mark-to-market expense for pension plans of $14 million for the quarter ended March 28, 2020. Additionally, we recorded a pre-tax mark-to-market expense of $41 ~~million~~million for the quarter ended March 30, 2019. Included within the aforementioned was a pre-tax mark-to-market ~~benefit~~expense for pension plans of $1 million for the quarter ended March 30, 2019. Additionally, we recorded a pre-tax mark-to-market benefit of $39 million for the quarter ended March 31, 2018. Included within the aforementioned was a pre-tax mark-to-market benefit for pension plans of $25 million for the quarter ended March 31, 2018.

~~Restructuring and cost reduction activities~~

Project K ~~continued generating savings used to invest in key strategic areas~~

In 2019, the Company completed implementation of ~~focus for the business.~~all Project K initiatives. We recorded pre-tax charges related to this program of $8 million ~~and $20 million~~ for the ~~quarters~~quarter ended March 30, ~~2019 and March 31, 2018, respectively.~~2019.

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

Brexit impacts

~~With~~During 2019, with the uncertainty of the United ~~Kingdom~~Kingdom's (U.K.) ~~exiting~~exit from the European Union (EU), commonly referred to as Brexit, we ~~have begun preparations~~incurred certain costs to proactively prepare for the potential adverse impacts, ~~of Brexit,~~ such as delays at ports of entry and departure. As a result, we incurred ~~pre-tax~~pretax charges of $3 million for the quarter ended March 30, 2019.

Business and portfolio realignment

~~Up front and/or one-time~~

One-time costs related ~~to: pending and prospective divestitures and acquisitions, including our previously announced proposed divestiture of our cookies, fruit snacks, pie crusts, and ice-cream cone businesses;~~to reorganizations in support of our Deploy for Growth priorities and a reshaped portfolio; ~~and~~ investments in enhancing capabilities prioritized by our Deploy for Growth ~~strategy.~~strategy; and completed and prospective divestitures and acquisitions, including the divestiture of our cookies, fruit snacks, pie crusts, and ice-cream cone businesses. As a result, we incurred pre-tax charges, primarily related to reorganizations, of $6 million for the quarter ended March 28, 2020. We also recorded pre tax-charges of $31 million for the quarter ended March 30, 2019.

~~Acquisitions~~Divestiture

~~In May of 2018,~~On July 28, 2019, the Company ~~acquired an incremental 1% ownership interest~~completed its sale of selected cookies, fruit and fruit-flavored snacks, pie crusts, and ice cream cones businesses to Ferrero for approximately $1.3 billion in ~~Multipro, which along with concurrent changes~~cash, subject to a working capital adjustment mechanism. The operating results for these businesses were included primarily in our North America reportable segment, and to a lesser extent, Latin America, prior to the ~~shareholders' agreement, resulted in~~sale. Reported net sales for the ~~Company now having a 51% controlling interest in and began consolidating Multipro, a leading distributor of a variety of food products in Nigeria and Ghana. In our AMEA reportable segment,~~divested businesses totaled $313 million for the quarter ended March 30, ~~2019, the acquisition added $198 million in net sales that impacted the comparability of our reported results.~~2019.

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 March ~~30, 2019,~~28, 2020, our reported net sales ~~improved by 3.5%~~decreased 3% due primarily to the ~~consolidation~~absence of ~~Multipro~~ results ~~(May 2018).~~from the businesses divested in July 2019 as well as foreign currency. These impacts were partially offset by ~~unfavorable foreign currency~~growth in our base business as well as growth attributable to the global pandemic, during which ~~reduced net sales 3.7 percentage points.~~several regions implemented stay-at-home guidelines and consumers increased purchases of food for at-home consumption. Organic net sales increased ~~0.3%~~8% from the prior year after excluding the impact of ~~Multipro~~the divestiture and foreign ~~currency, due to growth in our international businesses and favorable price realization.~~currency.

First quarter reported operating profit ~~decreased 25%~~increased 21% versus the year-ago quarter ~~driven primarily~~due to higher sales in our base business as well as a pandemic-related increase in March, favorable mark-to-market adjustments and lower business and portfolio realignment charges versus the prior year quarter, partially offset by ~~higher input~~the absence of results from the divested businesses, incremental investments in safety, logistics, and ~~distribution costs, business realignment costs in~~IT, and the ~~current quarter, and unfavorable year-on-year mark-to-market and~~impact of foreign ~~currency impacts.~~currency. Currency-neutral adjusted operating profit decreased ~~4.6% after excluding foreign currency, mark-to-market, business realignment, restructuring, and costs preparing for potential Brexit.~~4%, as the absence of results from the divested businesses, which were seasonally weighted to the first half of the year, more than offset growth in the remaining business.

Reported diluted EPS of ~~$0.82~~$1.01 for the quarter was ~~down 35%~~up 23% compared to the prior year quarter of ~~$1.27~~$0.82 due ~~primarily~~ to higher ~~input~~sales in our base business as well as a pandemic-related increase in March, favorable mark-to-market adjustments and ~~distribution costs, a higher tax rate,~~lower business and portfolio realignment ~~costs~~charges versus the prior year quarter, partially offset by the absence of results from the businesses divested in July 2019 and the ~~current quarter, and unfavorable year-on-year mark-to-market and~~impact of foreign ~~currency impacts.~~currency. Currency-neutral adjusted diluted EPS of ~~$1.04~~$1.00 decreased ~~by 15%~~1% compared to prior year quarter of ~~$1.23,~~$1.01, after excluding the impact of ~~foreign currency,~~ mark-to-market, business and portfolio realignment, ~~restructuring,~~Project K, and ~~costs preparing for potential Brexit.~~foreign currency.

Reconciliation of certain non-GAAP Financial Measures


	Quarter ended						Quarter ended
Consolidated results (dollars in millions, except per share data)	March 30, 2019			March 31, 2018			March 28, 2020			March 30, 2019
Reported net income	$	282		$	444		$	347		$	282
Mark-to-market (pre-tax)	(41		)	39			12			(41		)
Restructuring and cost reduction activities (pre-tax)	(8		)	(20		)
Project K (pre-tax)							—			(8		)
Brexit impacts (pre-tax)	(3		)	—			—			(3		)
Business and portfolio realignment (pre-tax)	(31		)	—			(6		)	(31		)
Income tax impact applicable to adjustments, net*	19			(3		)	—			19
Adjusted net income	$	346		$	428		$	341		$	346
Foreign currency impact	(11		)				(4		)
Currency-neutral adjusted net income	$	357		$	428		$	345		$	346
Reported diluted EPS	$	0.82		$	1.27		$	1.01		$	0.82
Mark-to-market (pre-tax)	(0.12		)	0.11			0.04			(0.12		)
Restructuring and cost reduction activities (pre-tax)	(0.02		)	(0.06		)
Project K (pre-tax)							—			(0.02		)
Brexit impacts (pre-tax)	(0.01		)	—			—			(0.01		)
Business and portfolio realignment (pre-tax)	(0.09		)	—			(0.02		)	(0.09		)
Income tax impact applicable to adjustments, net*	0.05			(0.01		)	—			0.05
Adjusted diluted EPS	$	1.01		$	1.23		$	0.99		$	1.01
Foreign currency impact	(0.03		)				(0.01		)	—
Currency-neutral adjusted diluted EPS	$	1.04		$	1.23		$	1.00		$	1.01
Currency-neutral adjusted diluted EPS growth	(15.4		)%				(1.0		)%



	Quarter ended
(unaudited)	March 28, 2020			March 30, 2019
Operating activities
Net income	$	350		$	285
Adjustments to reconcile net income to operating cash flows:
Depreciation and amortization	117			124
Postretirement benefit plan expense (benefit)	(39		)	(38		)
Deferred income taxes	8			7
Stock compensation	19			13
Other	(11		)	(8		)
Postretirement benefit plan contributions	(6		)	(5		)
Changes in operating assets and liabilities, net of acquisitions:
Trade receivables	(194		)	(229		)
Inventories	1			12
Accounts payable	44			(16		)
All other current assets and liabilities	102			(75		)
Net cash provided by (used in) operating activities	391			70
Investing activities
Additions to properties	(112		)	(148		)
Acquisition of cost method investments	(3		)	—
Purchases of available for sale securities	(65		)	(7		)
Sales of available for sale securities	5			7
Other	(27		)	(15		)
Net cash provided by (used in) investing activities	(202		)	(163		)
Financing activities
Net issuances (reductions) of notes payable	549			429
Reductions of long-term debt	(3		)	—
Net issuances of common stock	46			7
Common stock repurchases	—			(220		)
Cash dividends	(195		)	(192		)
Collateral received on derivative instruments	80			—
Net cash provided by (used in) financing activities	477			24
Effect of exchange rate changes on cash and cash equivalents	(47		)	20
Increase (decrease) in cash and cash equivalents	619			(49		)
Cash and cash equivalents at beginning of period	397			321
Cash and cash equivalents at end of period	$	1,016		$	272

Supplemental cash flow disclosures
Interest paid	$	8		$	8
Income taxes paid	$	18		$	79

Supplemental cash flow disclosures of non-cash investing activities:
Additions to properties included in accounts payable	$	87		$	122



	Quarter ended
(unaudited)	March 30, 2019			March 31, 2018
Operating activities
Net income	$	285		$	444
Adjustments to reconcile net income to operating cash flows:
Depreciation and amortization	124			122
Postretirement benefit plan expense (benefit)	(38		)	(47		)
Deferred income taxes	7			(1		)
Stock compensation	13			16
Other	(8		)	(30		)
Postretirement benefit plan contributions	(5		)	(19		)
Changes in operating assets and liabilities, net of acquisitions:
Trade receivables	(229		)	(175		)
Inventories	12			13
Accounts payable	(16		)	(4		)
All other current assets and liabilities	(75		)	(91		)
Net cash provided by (used in) operating activities	70			228
Investing activities
Additions to properties	(148		)	(132		)
Purchases of available for sale securities	(7		)	—
Sales of available for sale securities	7			—
Other	(15		)	1
Net cash provided by (used in) investing activities	(163		)	(131		)
Financing activities
Net issuances (reductions) of notes payable	429			99
Net issuances of common stock	7			50
Common stock repurchases	(220		)	—
Cash dividends	(192		)	(187		)
Net cash provided by (used in) financing activities	24			(38		)
Effect of exchange rate changes on cash and cash equivalents	20			30
Increase (decrease) in cash and cash equivalents	(49		)	89
Cash and cash equivalents at beginning of period	321			281
Cash and cash equivalents at end of period	$	272		$	370

Supplemental cash flow disclosures
Interest paid	$	8		$	14
Income taxes paid	$	79		$	31

Supplemental cash flow disclosures of non-cash investing activities:
Additions to properties included in accounts payable	$	122		$	92



(millions)	Quarter ended March 30, 2019
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	31
Right-of-use assets obtained in exchange for new operating lease liabilities	$	12
Weighted-average remaining lease term - operating leases	6 years
Weighted-average discount rate - operating leases	3.1%



(millions)	Operating leases
2019 (nine months remaining)	93
2020	94
2021	71
2022	57
2023	47
2024 and beyond	125
Total minimum payments	$	487
Less interest	(40		)
Present value of lease liabilities	$	447



	March 28, 2020				December 28, 2019
(millions)	Principal amount		Effective interest rate		Principal amount		Effective interest rate
U.S. commercial paper	$	565	3.70	%	$	3	1.78	%
Bank borrowings	92				104
Total	$	657			$	107



	March 30, 2019 (unaudited)			December 29, 2018
Current assets
Cash and cash equivalents	$	272		$	321
Accounts receivable, net	1,633			1,375
Inventories	1,319			1,330
Other current assets	149			131
Total current assets	3,373			3,157
Property, net	3,733			3,731
Operating lease right-of-use assets	438			—
Goodwill	6,054			6,050
Other intangibles, net	3,349			3,361
Investments in unconsolidated entities	410			413
Other assets	1,108			1,068
Total assets	$	18,465		$	17,780
Current liabilities
Current maturities of long-term debt	$	509		$	510
Notes payable	605			176
Accounts payable	2,370			2,427
Current operating lease liabilities	108			—
Other current liabilities	1,386			1,416
Total current liabilities	4,978			4,529
Long-term debt	8,183			8,207
Operating lease liabilities	339			—
Deferred income taxes	755			730
Pension liability	630			651
Other liabilities	483			504
Commitments and contingencies
Equity
Common stock, $.25 par value	105			105
Capital in excess of par value	877			895
Retained earnings	7,762			7,652
Treasury stock, at cost	(4,744		)	(4,551		)
Accumulated other comprehensive income (loss)	(1,467		)	(1,500		)
Total Kellogg Company equity	2,533			2,601
Noncontrolling interests	564			558
Total equity	3,097			3,159
Total liabilities and equity	$	18,465		$	17,780



	Quarter ended
(Results are unaudited)	March 30, 2019			March 31, 2018
Net sales	$	3,522		$	3,401
Cost of goods sold	2,415			2,149
Selling, general and administrative expense	726			742
Operating profit	381			510
Interest expense	74			69
Other income (expense), net	52			70
Income before income taxes	359			511
Income taxes	72			67
Earnings (loss) from unconsolidated entities	(2		)	—
Net income	285			444
Net income attributable to noncontrolling interests	3			—
Net income attributable to Kellogg Company	$	282		$	444
Per share amounts:
Basic earnings	$	0.82		$	1.28
Diluted earnings	$	0.82		$	1.27
Average shares outstanding:
Basic	342			346
Diluted	343			348
Actual shares outstanding at period end	340			347



	Quarter ended
(millions)	March 31, 2018
Net sales	$	3,609
Net Income attributable to Kellogg Company	$	444



(millions)	North America			Europe			Latin America			AMEA			Consoli- dated
December 28, 2019	$	4,422		$	347		$	213		$	879		$	5,861
Currency translation adjustment	(3		)	(12		)	(35		)	(39		)	(89		)
March 28, 2020	$	4,419		$	335		$	178		$	840		$	5,772



Gross carrying amount
(millions)	North America			Europe			Latin America			AMEA			Consoli- dated
December 28, 2019	$	64		$	41		$	60		$	429		$	594
Currency translation adjustment	—			—			(12		)	(7		)	(19		)
March 28, 2020	$	64		$	41		$	48		$	422		$	575

Accumulated Amortization
December 28, 2019	$	31		$	21		$	15		$	34		$	101
Amortization	1			1			1			4			7
Currency translation adjustment	—			—			(3		)	—			(3		)
March 28, 2020	$	32		$	22		$	13		$	38		$	105

Intangible assets subject to amortization, net
December 28, 2019	$	33		$	20		$	45		$	395		$	493
Amortization	(1		)	(1		)	(1		)	(4		)	(7		)
Currency translation adjustment	—			—			(9		)	(7		)	(16		)
March 28, 2020	$	32		$	19		$	35		$	384		$	470



	Quarter ended					Program costs to date
(millions)	March 30, 2019			March 31, 2018		March 30, 2019
Employee related costs	$	(3	)	$	4	$	594
Pension curtailment (gain) loss, net	—			—		(167		)
Asset related costs	3			4		288
Asset impairment	—			—		169
Other costs	8			12		644
Total	$	8		$	20	$	1,528

	Quarter ended					Program costs to date
(millions)	March 30, 2019			March 31, 2018		March 30, 2019
North America	$	4		$	10	$	1,026
Europe	1			7		334
Latin America	2			2		44
AMEA	1			—		99
Corporate	—			1		25
Total	$	8		$	20	$	1,528



	Employee Related Costs			Pension curtailment (gain) loss, net		Other Costs			Total
Liability as of December 28, 2019	$	37		$	—	$	1		$	38
2020 restructuring charges	—			—		1			1
Cash payments	(15		)	—		(2		)	(17		)
Non-cash charges and other	—			—		—			—
Liability as of March 28, 2020	$	22		$	—	$	—		$	22



	Employee Related Costs			Pension curtailment (gain) loss, net		Asset Impairment		Asset Related Costs			Other Costs			Total
Liability as of December 29, 2018	$	93		$	—	$	—	$	1		$	10		$	104
2019 restructuring charges	(3		)	—		—		3			8			8
Cash payments	(19		)	—		—		(3		)	(15		)	(37		)
Non-cash charges and other	—			—		—		(1		)	—			(1		)
Liability as of March 30, 2019	$	71		$	—	$	—	$	—		$	3		$	74



(millions)
Details about AOCI components	Amount reclassified from AOCI						Line item impacted within Income Statement
	Quarter ended March 28, 2020			Quarter ended March 30, 2019
(Gains) losses on cash flow hedges:
Interest rate contracts	$	2		$	1		Interest expense
	$	2		$	1		Total before tax
	—			—			Tax expense (benefit)
	$	2		$	1		Net of tax
Amortization of postretirement and postemployment benefits:
Net experience (gain) loss	$	(1	)	$	(1	)	OIE
	$	(1	)	$	(1	)	Total before tax
	—			—			Tax expense (benefit)
	$	(1	)	$	(1	)	Net of tax
Total reclassifications	$	1		$	—		Net of tax



(millions)	Operating leases
2019	121
2020	97
2021	73
2022	57
2023	48
2024 and beyond	129
Total minimum payments	$	525



	March 30, 2019				December 29, 2018
(millions)	Principal amount		Effective interest rate		Principal amount		Effective interest rate (a)
U.S. commercial paper	$	409	2.68	%	$	15	2.75	%
Bank borrowings	196				161
Total	$	605			$	176



(millions)	Pension		Nonpension postretirement		Total
Quarter ended:
March 28, 2020	$	3	$	3	$	6
March 30, 2019	$	1	$	4	$	5
Full year:
Fiscal year 2020 (projected)	$	7	$	19	$	26
Fiscal year 2019 (actual)	$	10	$	18	$	28


As of March 30, 2019:
				Gross Amounts Not Offset in the Consolidated Balance Sheet
As of March 28, 2020:															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	$	120		$	(32	)	$	—	$	88		$	240		$	(91	)	$	(77	)	$	72
Total liability derivatives	$	(45	)	$	32		$	2	$	(11	)	$	(118	)	$	91		$	—		$	(27	)




As of December 28, 2019:				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	$	117		$	(27	)	$	(7	)	$	83
Total liability derivatives	$	(36	)	$	27		$	—		$	(9	)



As of December 29, 2018:
				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	$	102		$	(27	)	$	(2	)	$	73
Total liability derivatives	$	(35	)	$	27		$	—		$	(8	)


(millions)	Gain (loss) recognized in AOCI						Gain (loss) excluded from assessment of hedge effectiveness				Location of gain (loss) in income of excluded component	Gain (loss) recognized in AOCI					Gain (loss) excluded from assessment of hedge effectiveness				Location of gain (loss) in income of excluded component
	March 30, 2019			March 31, 2018			March 30, 2019		March 31, 2018			March 28, 2020		March 30, 2019			March 28, 2020		March 30, 2019
Foreign currency denominated long-term debt	$	51		$	(73	)	$	—	$	—		$	9	$	51		$	—	$	—
Cross-currency contracts	(8		)	(8		)	8		3		Interest expense	66		(8		)	9		8		Interest expense
Total	$	43		$	(81	)	$	8	$	3		$	75	$	43		$	9	$	8


(millions)	Location of gain (loss) recognized in income	Gain (loss) recognized in income						Location of gain (loss) recognized in income	Gain (loss) recognized in income
		March 30, 2019			March 31, 2018				March 28, 2020			March 30, 2019
Foreign currency exchange contracts	COGS	$	(11	)	$	3		COGS	$	51		$	(11	)
Foreign currency exchange contracts	Other income (expense), net	(1		)	(4		)	Other income (expense), net	9			(1		)
Foreign currency exchange contracts	SG&A	—			1			SG&A	4			—
Commodity contracts	COGS	(32		)	5			COGS	(24		)	(32		)
Total		$	(44	)	$	5			$	40		$	(44	)



	March 28, 2020							December 28, 2019
			Unrealized							Unrealized
(millions)	Cost		Gain (Loss)			Market Value		Cost		Gain (Loss)		Market Value
Corporate bonds	$	60	$	(3	)	$	57	$	—	$	—	$	—



Consolidated Balance Sheet
(millions)	March 28, 2020 (unaudited)			December 28, 2019
Trade receivables	$	1,473		$	1,315
Allowance for doubtful accounts	(22		)	(10		)
Refundable income taxes	46			56
Other receivables	251			215
Accounts receivable, net	$	1,748		$	1,576
Raw materials and supplies	$	312		$	303
Finished goods and materials in process	877			923
Inventories	$	1,189		$	1,226
Property	$	8,825		$	9,051
Accumulated depreciation	(5,385		)	(5,439		)
Property, net	$	3,440		$	3,612
Pension	$	251		$	241
Deferred income taxes	222			231
Other	764			667
Other assets	$	1,237		$	1,139
Accrued income taxes	$	99		$	42
Accrued salaries and wages	185			290
Other	915			577
Other current liabilities	$	1,199		$	909
Income taxes payable	$	82		$	81
Nonpension postretirement benefits	31			33
Other	402			429
Other liabilities	$	515		$	543



Consolidated Balance Sheet
(millions)	March 30, 2019 (unaudited)			December 29, 2018
Trade receivables	$	1,394		$	1,163
Allowance for doubtful accounts	(10		)	(10		)
Refundable income taxes	22			28
Other receivables	227			194
Accounts receivable, net	$	1,633		$	1,375
Raw materials and supplies	$	356		$	339
Finished goods and materials in process	963			991
Inventories	$	1,319		$	1,330
Property	$	9,279		$	9,173
Accumulated depreciation	(5,546		)	(5,442		)
Property, net	$	3,733		$	3,731
Pension	$	251		$	228
Deferred income taxes	245			246
Other	612			594
Other assets	$	1,108		$	1,068
Accrued income taxes	$	29		$	48
Accrued salaries and wages	205			309
Accrued advertising and promotion	582			557
Other	570			502
Other current liabilities	$	1,386		$	1,416
Income taxes payable	$	118		$	115
Nonpension postretirement benefits	35			34
Other	330			355
Other liabilities	$	483		$	504


Net sales % change - first quarter 2019 vs. 2018:
Net sales % change - first quarter 2020 vs. 2019:							Net sales % change - first quarter 2020 vs. 2019:
North America	Reported net sales		Foreign currency		Currency-neutral net sales		Reported net sales		Foreign currency		Currency-neutral net sales		Divestiture		Organic net sales
Snacks	(0.2	)%	(0.2	)%	—	%	(17.3	)%	(0.1	)%	(17.2	)%	(28.0	)%	10.8	%
Cereal	(4.9	)%	(0.5	)%	(4.4	)%	2.7	%	(0.2	)%	2.9	%	—	%	2.9	%
Frozen	(1.5	)%	(0.2	)%	(1.3	)%	8.4	%	(0.2	)%	8.6	%	—	%	8.6	%



Quarter	2019					2018					GM change vs. prior year (pts.)
	Gross Profit (a)			Gross Margin (b)		Gross Profit (a)			Gross Margin (b)		GM change vs. prior year (pts.)
Reported	$	1,107		31.4	%	$	1,252		36.8	%	(5.4	)
Mark-to-market	(42		)	(1.2	)%	30			0.9	%	(2.1	)
Restructuring and cost reduction activities	(6		)	(0.2	)%	(13		)	(0.4	)%	0.2
Brexit impacts	(3		)	(0.1	)%	—			—	%	(0.1	)
Business and portfolio realignment	(4		)	(0.1	)%	—			—	%	(0.1	)
Foreign currency impact	(36		)	0.1	%	—			—	%	0.1
Currency-neutral adjusted	$	1,198		32.9	%	$	1,235		36.3	%	(3.4	)


	Quarter ended						Quarter ended
Consolidated results (dollars in millions)	March 30, 2019			March 31, 2018			March 28, 2020			March 30, 2019
Reported income taxes	$	72		$	67		$	94		$	72
Mark-to-market	(12		)	7			3			(12		)
Restructuring and cost reduction activities	—			(4		)
Project K							—			—
Brexit impacts	—			—			—			—
Business and portfolio realignment	(7		)	—			(3		)	(7		)
Adjusted income taxes	$	91		$	64		$	94		$	91
Reported effective income tax rate	20.0		%	13.1		%	21.1		%	20.0		%
Mark-to-market	(0.8		)%	0.5		%	0.2		%	(0.8		)%
Restructuring and cost reduction activities	0.4		%	(0.3		)%
Project K							—		%	0.4		%
Brexit impacts	0.1		%	—		%	—		%	0.1		%
Business and portfolio realignment	(0.2		)%	—		%	(0.4		)%	(0.2		)%
Adjusted effective income tax rate	20.5		%	12.9		%	21.3		%	20.5		%



(millions, unaudited)	March 28, 2020			December 28, 2019
Notes payable	$	657		$	107
Current maturities of long-term debt	626			620
Long-term debt	7,163			7,195
Total debt liabilities	8,446			7,922
Less:
Cash and cash equivalents	(1,016		)	(397		)
Net debt	$	7,430		$	7,525



Impact of certain items excluded from Non-GAAP guidance:	Net Sales	Operating Profit	Earnings Per Share
~~Project K~~Business and ~~cost restructuring activities~~portfolio realignment (pre-tax)		~$~~45-55M~~60-$70M	~$~~0.13-0.16~~0.17-$0.20
Income tax impact applicable to adjustments, net**			~$~~0.03-0.04~~0.04
Currency-neutral adjusted guidance (before pending divestiture)guidance	~~3-4%~~(2)%-0%	~~~Flat~~(4)%	~~(5)~~(3)%-~~(7)~~(4)%
Absence of results from divested business	~4%
~~Pending divestiture impacts~~53rd Week	~(1)-(2)~~-(3)%~~	~~~(4)-(5)%~~	~~~(4)-(5)%~~
Updated Currency-neutral adjusted guidance (including pending divestiture)*	~~1-2%~~	~~(4)-(5)%~~	~~(10)-(11)%~~
~~Subtract: Acquisitions~~	2%
~~Add Back: Divestiture~~	~~~(2)-(3)~~%
Organic ~~guidance~~guidance*	1-2%



Reconciliation of Non-GAAP amounts - Cash Flow Guidance
(billions)	Full Year ~~2019~~2020
Net cash provided by (used in) operating activities	~$~~1.5-1.6~~1.5-$1.6
Additions to properties	~($0.6)
Cash Flow*Flow	~$~~0.9-1.0~~0.9-$1.0


Period	(a) Total Number of Shares Purchased	(b) Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs		(a) Total Number of Shares Purchased	(b) Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Month #1:
12/30/2018 - 1/26/2019	—	$	—	—	$	1,180
12/29/2019 - 1/25/2020							—	$	—	—	$	1,500
Month #2:
1/27/2019 - 2/23/2019	3.9	$	56.62	3.9	$	960
1/26/2020 - 2/22/2020							—	$	—	—	$	1,500
Month #3:
2/24/2019 - 3/30/2019	—	$	—	—	$	960
2/23/2020 - 3/28/2020							—	$	—	—	$	1,500
Total	3.9	$	56.62	3.9			—	$	—	—



4.1	364-Day Credit Agreement dated as of January 28, 2020 with JPMorgan Chase Bank, N.A., as Administrative Agent, Barclays Bank PLC, as Syndication Agent, and JPMorgan Chase Bank, N.A., Barclays Bank PLC, BofA Securities, Inc., Citibank, N.A., Coöperatieve Rabobank U.A., New York Branch, Morgan Stanley MUFG Loan Partners, LLC and Wells Fargo Securities, LLC, as Joint Lead Arrangers and Joint Bookrunners and the lenders named therein incorporated by reference to Exhibit 4.1 of our Current Report on Form 8-K dated January 30, 2020, Commission file number 1-4171
10.1	2020-2022 Executive Performance Plan, incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K dated February 25, 2020, Commission file number 1-4171
10.2	Form of Restricted Stock Unit Terms and Conditions, incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K dated February 25, 2020, Commission file number 1-4171
10.3	Form of Option Terms and Conditions, incorporated by reference to Exhibit 10.3 of our Current Report on Form 8-K dated February 25, 2020, Commission file number 1-4171
31.1	Rule 13a-14(e)/15d-14(a) Certification from Steven A. Cahillane
31.2	Rule 13a-14(e)/15d-14(a) Certification from ~~Fareed Khan~~Amit Banati
32.1	Section 1350 Certification from Steven A. Cahillane
32.2	Section 1350 Certification from ~~Fareed Khan~~Amit Banati
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document



Exhibit No.	Description	Electronic (E) Paper (P) Incorp. By Ref. (IBRF)
4.1	364-Day Credit Agreement dated as of January 28, 2020 with JPMorgan Chase Bank, N.A., as Administrative Agent, Barclays Bank PLC, as Syndication Agent, and JPMorgan Chase Bank, N.A., Barclays Bank PLC, BofA Securities, Inc., Citibank, N.A., Coöperatieve Rabobank U.A., New York Branch, Morgan Stanley MUFG Loan Partners, LLC and Wells Fargo Securities, LLC, as Joint Lead Arrangers and Joint Bookrunners and the lenders named therein incorporated by reference to Exhibit 4.1 of our Current Report on Form 8-K dated January 30, 2020, Commission file number 1-4171	IBRF
10.1	2020-2022 Executive Performance Plan, incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K dated February 25, 2020, Commission file number 1-4171	IBRF
10.2	Form of Restricted Stock Unit Terms and Conditions, incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K dated February 25, 2020, Commission file number 1-4171	IBRF
10.3	Form of Option Terms and Conditions, incorporated by reference to Exhibit 10.3 of our Current Report on Form 8-K dated February 25, 2020, Commission file number 1-4171	IBRF
31.1	Rule 13a-14(e)/15d-14(a) Certification from Steven A. Cahillane	E
31.2	Rule 13a-14(e)/15d-14(a) Certification from ~~Fareed Khan~~Amit Banati	E
32.1	Section 1350 Certification from Steven A. Cahillane	E
32.2	Section 1350 Certification from ~~Fareed Khan~~Amit Banati	E
101.INS	XBRL Instance Document	E
101.SCH	XBRL Taxonomy Extension Schema Document	E
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	E
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	E
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	E
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	E