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What changed in Kellanova's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Kellanova's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+506 added−498 removedSource: 10-K (2024-02-20) vs 10-K (2022-02-22)

Top changes in Kellanova's 2023 10-K

506 paragraphs added · 498 removed · 345 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

69 edited+32 added−25 removed16 unchanged
Biggest changeOur future results could be affected by a variety of other factors, including uncertainty of the magnitude, duration, geographic reach, impact on the global economy and current and potential travel restrictions of the COVID-19 outbreak, the current, and uncertain future, impact of the COVID-19 outbreak on our business, growth, reputation, prospects, financial condition, operating results (including components of our financial results), and cash flows and liquidity, the residual impact of the 12-week labor strike at the Company's U.S. cereal plants and a fire at one of the plants, 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 success of our Better Days and sustainability programs; the recoverability of the carrying value of goodwill and other intangibles, the success of productivity improvements and business transitions, commodity and energy prices, transportation costs, labor costs, disruptions or inefficiencies in supply chain, the availability of and interest rates on short-term and long-term financing, actual market performance of benefit plan trust investments, the levels of spending on systems initiatives, properties, business opportunities, integration of acquired businesses, and other general and administrative costs, changes in consumer behavior and preferences, the effect of U.S. and foreign economic conditions on items such as interest rates, statutory tax rates, currency conversion and availability, legal and regulatory factors including changes in food safety, advertising and labeling laws and regulations, the ultimate impact of product recalls; business disruption or other losses from war, terrorist acts or political unrest; and the risks and uncertainties described in Item 1A below.
Biggest changeOur future results could be affected by a variety of other factors, including the impact of macroeconomic conditions; business disruptions; consumers' and other stakeholders' perceptions of our brands; 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 ability to realize the intended benefits of the separation of WK Kellogg Co (the "separation"); the possibility of disruption from the separation, including changes to existing business relationships, disputes, litigation or unanticipated costs; uncertainty of the expected financial performance of the Company following completion of the separation; the effectiveness of pricing, advertising, and promotional programs; the success of innovation, renovation and new product introductions; the success of our Better Days and sustainability programs; the recoverability of the carrying value of goodwill and other intangibles; the success of productivity improvements and business transitions; commodity and energy prices, 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; other general and administrative costs; changes in consumer behavior and preferences; the effect of U.S. and foreign economic conditions on items such as interest rates; statutory tax rates; currency conversion and availability; legal and regulatory factors including changes in food safety, advertising and labeling laws and regulations, the ultimate impact of product recalls; business disruption or other losses from war, terrorist acts or political unrest; and the risks and uncertainties described in Item 1A below.
Our products have been generally sold through our own sales 5 forces and through broker and distributor arrangements, and have been generally resold to consumers in retail stores, restaurants, and other food service establishments. Backlog. For the most part, orders are filled within a few days of receipt and are subject to cancellation at any time prior to shipment.
Our products have been generally sold through our own sales forces and through broker and distributor arrangements, and have been generally resold to consumers in retail stores, restaurants, and other food service establishments. Backlog. For the most part, orders are filled within a few days of receipt and are subject to cancellation at any time prior to shipment.
We report to our Board of Directors on a periodic basis about the actions we have taken to make progress on our ED&I journey, and we are firmly committed to continuing to advance our ED&I priorities. Our focus on equity, diversity and inclusion enables us to build a culture where employees are inspired to share their passion, talents and ideas.
We report to our Board of Directors on a periodic basis about the actions we have taken to make progress on our ED&I journey, and we are firmly committed to continuing to advance ED&I. Our focus on equity, diversity and inclusion enables us to build a culture where employees are inspired to share their passion, talents and ideas.
Registrations of trademarks can also generally be renewed indefinitely as long as the trademarks are in use. Seasonality. Demand for our products is generally level throughout the year, although some of our convenience foods have a bias for stronger demand in the second half of the year due to events and holidays. Working Capital.
Registrations of trademarks can also generally be renewed indefinitely as long as the trademarks are in use. 5 Seasonality. Demand for our products is generally level throughout the year, although some of our convenience foods have a bias for stronger demand in the second half of the year due to events and holidays. Working Capital.
The trademarks listed above, among others, when taken as a whole, are important to our business. Certain individual trademarks are also important to our business. Depending on the jurisdiction, trademarks are generally valid as long as they are in use and/or their registrations are properly maintained and they have not been found to have become generic.
The trademarks listed above, among others, individually and when taken as a whole, are important to our business. Certain individual trademarks are also important to our business. Depending on the jurisdiction, trademarks are generally valid as long as they are in use and/or their registrations are properly maintained and they have not been found to have become generic.
Risks are identified annually through annual reporting and evaluated in the short ( 6 years). These natural capital dependencies are at risk of shortage, price volatility, regulation, and quality impacts due to climate change which is assessed as part of Kellogg’s overall enterprise risk management approach.
Risks are identified annually through annual reporting and evaluated in the short ( 6 years). These natural capital dependencies are at risk of shortage, price volatility, regulation, and quality impacts due to climate change which is assessed as part of Kellanova’s overall enterprise risk management approach.
Through many initiatives, supported by our Business Employee Resource Groups and ED&I Champions, several leading organizations recognized Kellogg for our commitment to building and supporting equity, diversity and inclusion in our workplace, marketplace and the communities where we work and live.
Through many initiatives, supported by our Business Employee Resource Groups and ED&I Champions, several leading organizations recognized Kellanova for our commitment to building and supporting equity, diversity and inclusion in our workplace, marketplace and the communities where we work and live.
The Company also maintains an ethics related hotline, managed by a third party, through which individuals can anonymously raise concerns or ask questions about business behavior. Financial Information About Geographic Areas. Information on geographic areas is located in Note 16 within Notes to the Consolidated Financial Statements, which are included herein under Part II, Item 8. Executive Officers.
The Company also maintains an ethics related hotline, managed by a third party, through which individuals can anonymously raise concerns or ask questions about business behavior. Financial Information About Geographic Areas. Information on geographic areas is located in Note 18 within Notes to the Consolidated Financial Statements, which are included herein under Part II, Item 8. 7 Executive Officers.
Specific risks including water stress and social accountability are specifically identified and assessed on a regular basis, especially in emerging market expansion that fuels company growth. Due to these risks, Kellogg has implemented major short- and long-term initiatives to mitigate and adapt to these environmental pressures, as well as the resulting challenge of food security.
Specific risks including water stress and social accountability are specifically identified and assessed on a regular basis, especially in emerging market expansion that fuels company growth. Due to these risks, Kellanova has implemented short and long-term initiatives to mitigate and adapt to these environmental pressures, as well as the resulting challenge of food security.
Our eight Business Employee Resource Groups, which include KVets and Supporters, Kellogg Multinational Employee Resource Group, Kellogg’s Young Professionals, Kellogg African American Resource Group, Women of Kellogg, Hola (our Latino resource group), KPride & Allies (our LBGTQ+ resource group), and Kapable (our resource group for people with disabilities and their supporters), also play a critical role in attracting diverse talent, providing mentoring and career development opportunities, delivering commercial business insights and connecting people to the Company and the communities where we do business.
Our eight Business Employee Resource Groups, which include KVets and Supporters, Kellanova Multinational Employee Resource Group, Kellanova’s Young Professionals, Kellanova African American Resource Group, Women of Kellogg, Hola (our Latino resource group), KPride & Allies (our LBGTQ+ resource group), and Kapable (our resource group for people with disabilities and their supporters), also play a critical role in attracting diverse talent, providing mentoring and career development 6 opportunities, delivering commercial business insights and connecting people to the Company and the communities where we do business.
Banati joined Kellogg in March 2012 as President, Asia Pacific, and his responsibilities were expanded to President, Asia Pacific, Middle East and Africa in July 2018. Before joining Kellogg Company, Mr. Banati served in a variety of finance, general management and board roles at Kraft Foods, Cadbury Schweppes and Procter & Gamble.
Banati joined Kellanova in March 2012 as President, Asia Pacific, and his responsibilities were expanded to President, Asia Pacific, Middle East and Africa in July 2018. Before joining Kellanova, Mr. Banati served in a variety of finance, general management and board roles at Kraft Foods, Cadbury Schweppes and Procter & Gamble.
Any amendments or waivers to the Global Code of Ethics applicable to the chief executive officer, chief financial officer and corporate controller can also be found in the “Investor Relations” section of the Kellogg Company website. Shareowners may also request a free copy of these documents from: Kellogg Company, P.O.
Any amendments or waivers to the Global Code of Ethics applicable to the chief executive officer, chief financial officer and corporate controller can also be found in the “Investor Relations” section of the Kellanova website. Shareowners may also request a free copy of these documents from: Kellanova, P.O.
Box CAMB, Battle Creek, Michigan 49016-9935 (phone: (800) 961-1413), Investor Relations Department at that same address (phone: (269) 961-2800) or investor.relations@kellogg.com. Forward-Looking Statements.
Box CAMB, Battle Creek, Michigan 49016-9935 (phone: (800) 961-1413), Investor Relations Department at that same address (phone: (269) 961-2800) or investor.relations@Kellanova.com. Forward-Looking Statements.
Company Ethics: The Company has processes in place for compliance with the Code of Conduct for Kellogg Company Board of Directors and Global Code of Ethics for Kellogg Company employees, each including a requirement for annual certification that provides employees an opportunity to disclose actual or potential conflicts of interest, report actual or potential violations of the law, the Code or policy and acknowledge their obligation to comply with the applicable code.
Company Ethics: The Company has processes in place for compliance with the Code of Conduct for Kellanova Board of Directors and Global Code of Ethics for Kellanova employees, each including a requirement for regular certification that provides employees an opportunity to disclose actual or potential conflicts of interest, report actual or potential violations of the law, the Code or policy and acknowledge their obligation to comply with the applicable code.
Our principal products are snacks, such as crackers, savory snacks, toaster pastries, cereal bars, granola bars and bites; and convenience foods, such as, ready-to-eat cereals, frozen waffles, veggie foods and noodles. These products were, as of February 22, 2022, manufactured by us in 21 countries and marketed in more than 180 countries.
Our principal products are snacks, such as crackers, savory snacks, toaster pastries, cereal bars, granola bars and bites; and convenience foods, such as, ready-to-eat cereals, frozen waffles, veggie foods and noodles. These products were, as of February 20, 2024, manufactured by us in 21 countries and marketed in more than 180 countries.
A description of our working capital is included in the Liquidity section of MD&A within Item 7 of this Report. Customers. Our largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for approximately 19% of consolidated net sales during 2021, comprised principally of sales within the United States.
A description of our working capital is included in the Liquidity section of MD&A within Item 7 of this Report. Customers. Our largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for approximately 15% of consolidated net sales during 2023, comprised principally of sales within the United States.
Generally, our products are marketed under trademarks we own. Our principal trademarks are our housemarks, brand names, slogans, and designs related to cereals, snacks and various other foods manufactured and marketed by us, and we also grant licenses to third parties to use these marks on various goods.
Generally, our products are marketed under trademarks we own. Our principal trademarks are our housemarks, brand names, slogans, and designs related to snacks, frozen breakfast, international cereals and noodles and various other foods manufactured and marketed by us. We also grant licenses to third parties to use these marks on various goods.
The principal ingredients in the products produced by us in the United States include corn grits, wheat and wheat derivatives, potato flakes, oats, rice, cocoa and chocolate, soybeans and soybean derivatives, various fruits, sweeteners, vegetable oils, dairy products, eggs, and other ingredients, which are obtained from various sources.
The principal ingredients in the products produced by us in the United States include wheat and wheat-based ingredients, potato flakes, oats, rice, cocoa and chocolate, soybeans and soybean derivatives, various fruits, sugars and sweeteners, vegetable oils, dairy products, eggs, and other ingredients, which are obtained from various sources.
Copies of the Corporate Governance Guidelines, the Charters of the Audit, Compensation and Talent Management, and Nominating and Governance Committees of the Board of Directors, the Code of Conduct for Kellogg Company directors and Global Code of Ethics for Kellogg Company employees (including the chief executive officer, chief financial officer and corporate controller) can also be found on the Kellogg Company website.
Copies of our Corporate Governance Guidelines, the Charters of the Audit, Compensation and Talent Management, and Nominating and Governance Committees of the Board of Directors, the Code of Conduct for the Company's Board of Directors and Global Code of Ethics for the Company's employees (including the chief executive officer, chief financial officer and corporate controller) can also be found on the Kellanova website.
No other customer accounted for greater than 10% of net sales in 2021. During 2021, our top five customers, collectively, including Wal-Mart, accounted for approximately 32% of our consolidated net sales and approximately 53% of U.S. net sales. There has been significant worldwide consolidation in the grocery industry and we believe that this trend is likely to continue.
No other customer accounted for greater than 10% of net sales in 2023. During 2023, our top five customers, collectively, including Wal-Mart, accounted for approxima tely 26% of our consolidated net sales and approximately 46% of U.S. net sales. There has been significant worldwide consolidation in the grocery industry and we believe that this trend is likely to continue.
Climate change and food security are core business issues for Kellogg to ensure the long-term health and viability of the ingredients we use in our products. As a grain-based food company, the success of Kellogg Company is dependent on having timely access to high quality, low cost ingredients, water and energy for manufacturing globally.
Climate change and food security are considerations for Kellanova to ensure the long-term health and viability of the ingredients we use in our products. As a plant-based food company, the success of Kellanova is dependent on having timely access to high quality, low cost ingredients, water and energy for manufacturing globally.
The cost of such commodities may fluctuate widely due to government policy and regulation, changing weather patterns and conditions, climate change, and other supply and/or demand impacting events such as a pandemic (such as the COVID-19 pandemic), geopolitical events, or other unforeseen circumstances.
The cost of such commodities may fluctuate widely due to government policy and regulation, changing weather patterns and conditions, climate change, and other supply and/or demand impacting events such as pandemics, geopolitical events, wars or other unforeseen circumstances.
Cahillane served as Executive Vice President of The Coca-Cola Company from February 2013 to February 2014 and President of Coca-Cola Americas, the global beverage maker’s largest business, with $25 billion in annual sales at that time, from January 2013 to February 2014. Mr. Cahillane served as President of various Coca-Cola operating groups from 2007 to 2012.
Prior to that, Mr. Cahillane served as Executive Vice President of The Coca-Cola Company, a beverage company, from February 2013 to February 2014 and President of Coca-Cola Americas, the global beverage maker’s largest business, with $25 billion in annual sales at that time, from January 2013 to February 2014. Mr.
The backlog of any unfilled orders at January 1, 2022 and January 2, 2021 was not material to us. Competition. We have experienced, and expect to continue to experience, intense competition for sales of all of our principal products in our major product categories, both domestically and internationally.
The backlog of any unfilled orders at December 30, 2023 and December 31, 2022 was not material to us. Competition. We have experienced, and expect to continue to experience, intense competition for sales of all of our principal products in our major product categories, both domestically and internationally.
We also market crackers, crisps, and other convenience foods, under brands such as Kellogg’s, Cheez-It, Pringles, and Austin, to supermarkets in the United States through a variety of distribution methods.
Our frozen foods are marketed under the Eggo and Morningstar Farms brands. We also market crackers, crisps, and other convenience foods, under brands such as Kellogg’s , Cheez-It , Pringles , and Austin , to supermarkets in the United States through a variety of distribution methods.
Research to support and expand the use of our existing products and to develop new food products is carried on at the W. K. Kellogg Institute for Food and Nutrition Research in Battle Creek, Michigan, and at other locations around the world. Our expenditures for research and development were approximately (in millions): 2021-$134; 2020-$135; 2019-$144.
Research to support and expand the use of our existing products and to develop new food products is carried on at the W. K. Kellogg Institute for Food and Nutrition Research in Battle Creek, Michigan, and at other locations around the world. Our expenditures for research and development were approximately (in millions): 2023-$116; 2022-$111; 2020-$117.
We continue to evolve our programs to meet our colleagues’ health and wellness needs, which we believe is essential to attract and retain employees of the highest caliber, and we offer a competitive benefits package focused on fostering work/life integration. In 2019, we launched My Total Health, our global employee wellbeing framework.
We continue to evolve our programs to meet our colleagues’ health and wellness needs, which we believe is essential to attract and retain employees of the highest caliber, and we offer a competitive benefits package focused on fostering work/life integration.
Other brand names include Kellogg’s Corn Flake Crumbs; Choco Krispis, Crunchy Nut, Kashi, Nutri-Grain, Special K, Squares, Zucaritas, Kashi and Sucrilhos for cereal bars; Pop-Tarts for toaster pastries; Eggo, Kashi and Nutri-Grain for frozen waffles and pancakes; MorningStar Farms and Special K for breakfast sandwiches; Rice Krispies Treats for convenience foods; Special K protein shakes; Nutri-Grain cereal bars for convenience foods in the United States and elsewhere; K-Time, Sunibrite, Split Stix, Be Natural and LCMs for convenience foods in Australia; Choco Krispies, Coco Pops, Crunchy Nut, Frosties and Rice Krispies Squares for convenience foods in Europe; Kashi for certain cereals, convenience foods, and frozen foods; Kashi Go for cereals and nutrition bars; Special K and Vector for meal bars; Bear Naked for granola cereal and snack bites, Pringles for crisps; and Morningstar Farms, Incogmeato, Veggitizers and Gardenburger for certain meat alternatives.
Other brand names include Kellogg’s Corn Flake Crumbs; Choco Krispis , Crunchy Nut , Kashi , Nutri-Grain , Special K , Squares , Zucaritas , Rice Krispies Treats , and Sucrilhos for cereal bars; Pop-Tarts for toaster pastries; Eggo and MorningStar Farms for frozen breakfast foods; Nutri-Grain cereal bars for convenience foods in the United States and elsewhere; K-Time , Sunibrite , Split Stix and LCMs for convenience foods in Australia; Nutri-Grain , Coco Pops , Crunchy Nut , Krave , Frosties , and Rice Krispies Squares for convenience foods in Europe; Special K for meal bars; Pringles for crisps; and Morningstar Farms , Incogmeato , Veggitizers , and Gardenburger for certain meat alternatives.
Additional information pertaining to the relative sales of our products for the years 2019 through 2021 is located in Note 16 within Notes to the Consolidated Financial Statements, which are included herein under Part II, Item 8. Environmental, Social and Governance (ESG) Leadership. In 2020, Kellogg launched a refreshed vision and purpose.
Additional information pertaining to the relative sales of our products for the years 2021 through 2023 is located in Note 18 within Notes to the Consolidated Financial Statements, which are included herein under Part II, Item 8. Environmental, Social and Governance (ESG) Leadership.
The Company has incorporated the risks and opportunities of climate change and food security as part of the Deploy For Growth Strategy and Kellogg’s® Better Days™ by continuing to identify risk, incorporate sustainability indicators into strategic priorities, and report regularly to leadership, the Board, and publicly.
The Company has incorporated the risks and opportunities of climate change and food security as part of the Differentiate, Drive, & Deliver Strategy and Kellanova Better Days™ Promise by continuing to identify risk, incorporate sustainability indicators into strategic priorities, and report regularly to leadership, the Board, and publicly. Oversight.
Prior to joining Kellogg, he was Regional President, Pet Nutrition, Asia Pacific for Mars Inc. from January 2017 to June 2020. In this role, Mr. Kapoor had additional oversight of the confectionary and food business in Japan and New Zealand. Prior to that, he was Regional President, Asia Pacific, for Mars’ Royal Canin business from January 2015 to December 2016.
Prior to joining Kellanova (formerly known as Kellogg Company), he was Regional President, Pet Nutrition, Asia Pacific for Mars Inc. from January 2017 to June 2020 . In this role, Mr. Kapoor had additional oversight of the confectionary and food business in Japan and New Zealand.
Amaya joined Kellogg Company in 2001 as a Marketing Intern for Eggo in the United States. Since then, he has held a variety of leadership positions in the U.S. and Latin America across the cereal, frozen and snacks businesses. Among his many contributions, Mr. Amaya led the complex and challenging regional integration of Pringles in 2012.
Amaya served as Senior Vice President, Kellanova (formerly Kellogg Company) and President, Kellanova Latin America. Mr. Amaya joined Kellanova in 2001 as a Marketing Intern for Eggo in the United States. Since then, he has held a variety of leadership positions in the U.S. and Latin America across the cereal, frozen and snacks businesses. Among his many contributions, Mr.
Forche joined Kellogg as an internal auditor in 1997, subsequently holding a number of Finance roles in the North American business until being named Senior Director, Corporate Financial Reporting in April 2014. Prior to joining Kellogg in 1997, he spent four years at Price Waterhouse as an auditor. Alistair D. Hirst 62 Senior Vice President, Global Supply Chain Mr.
Forche joined Kellanova as an internal auditor in 1997, subsequently holding a number of Finance roles in the North American business until being named Senior Director, Corporate Financial Reporting in April 2014. Prior to joining Kellanova in 1997, he spent four years at Price Waterhouse as an auditor. Melissa A. Howell 57 Senior Vice President, Global Human Services Ms.
He also served as the Chief Financial Officer for Cadbury Schweppes Asia Pacific. Steven A. Cahillane 56 Chairman and Chief Executive Officer Mr. Cahillane has been Chairman of the Board of Kellogg Company since March 2018, and President and Chief Executive Officer since October 2017. He has also served as a Kellogg Director since October 2017.
He also served as the Chief Financial Officer for Cadbury Schweppes Asia Pacific. Mr. Banati is a director of Fortune Brands Home Innovations. 8 Steven A. Cahillane 58 Chairman and Chief Executive Officer Mr. Cahillane has been Chairman of the Board of Kellanova (formerly known as Kellogg Company) since March 2018, and President and Chief Executive Officer since October 2017.
This office has been focused on recruiting and retaining employees, creating awareness of diversity issues, fostering a supportive, positive environment where inclusive behaviors are the norm, and embedding accountability for diversity throughout the organization. Our goal is to reflect the diversity of our consumers throughout our Company.
This office has been focused on recruiting and retaining employees, creating awareness, fostering a supportive, positive environment where inclusive behaviors are the norm, and embedding accountability for inclusion throughout the organization. Our goal is to create a place at the table for everyone.
Prior to joining Kellogg, Mr. Cahillane served as Chief Executive Officer and President, and as member of the board of directors, of Alphabet Holding Company, Inc., and its wholly-owned operating subsidiary, The Nature’s Bounty Co., from September 2014. Prior to that, Mr.
He has also served as a Kellanova Director since October 2017. Prior to joining Kellanova, Mr. Cahillane served as Chief Executive Officer and President, and as a member of the board of directors, of Alphabet Holding Company, Inc., a holding company, and its wholly-owned operating subsidiary, The Nature’s Bounty Co., a health and wellness company, from September 2014.
We continually monitor world supplies and prices of such commodities (which include such packaging materials), as well as government trade policies.
Cartonboard, corrugate, and flexible packaging are the principal packaging materials used by us. We continually monitor world supplies and prices of such commodities (which include such packaging materials), as well as government trade policies.
We also provide company paid access to gyms and mindfulness resources in many parts of the world. Most of our locations now use the My Total Health framework to guide how they communicate and engage with employees in support of their wellbeing.
Most of our locations now use the My Total Health framework to guide how they communicate and engage with employees in support of their wellbeing.
Over the following years, she served in a series of key human resource leadership roles in Europe, Asia and U.S. leading teams on six continents across an array of functional areas. Ms.
Over the following years, she served in a series of key human resources leadership roles in Europe, Asia and U.S. leading teams on six continents across an array of functional areas. Ms. Howell was promoted to Executive Director of North American Human Resources in 2011 and subsequently promoted to Senior Vice President of Global Human Resources.
Melissa A. Howell 55 Senior Vice President, Global Human Services Ms. Howell assumed her current position in June 2016. Prior to joining Kellogg, she was Chief Human Resources Officer for Rockford, Michigan-based Wolverine Worldwide since 2014. Prior to Wolverine, Ms.
Howell assumed her current position in June 2016. Prior to joining Kellanova (formerly known as Kellogg Company), she was Chief Human Resources Officer for Rockford, Michigan-based Wolverine since 2014. Prior to Wolverine, Ms.
In April 2013, he was appointed General Manager, Snacks and Growth Platforms for Latin America, and in 2015, he stepped up to the role of Vice President and General Manager, Category Marketing and Innovation, Latin America. He was promoted to Vice President and General Manager for Mexico in October 2016. Prior to Kellogg, Mr.
Amaya led the complex and challenging regional integration of Pringles in 2012. In April 2013, he was appointed General Manager, Snacks and Growth Platforms for Latin America, and in 2015, he stepped up to the role of Vice President and General Manager, Category Marketing and Innovation, Latin America.
The names, ages, and positions of our executive officers (as of February 22, 2022) are listed below, together with their business experience. Executive officers are elected annually by the Board of Directors. 7 Nicolas Amaya 48 Senior Vice President, Kellogg Company President, Kellogg Latin America Mr. Amaya assumed his current position in November 2019. Mr.
The names, ages, and positions of our executive officers (as of February 20, 2024) are listed below, together with their business experience. Executive officers are elected annually by the Board of Directors. Nicolas Amaya 50 Senior Vice President, Kellanova President, Kellanova North America Mr. Amaya assumed his current position on February 1, 2024. Prior to that, Mr.
We also provide a wide array of opportunities for volunteerism though Kellogg’s “Better Days” commitment, and provide matching donations for employees’ service to charities of their choosing in many regions. 6 Total Rewards: We provide a market-based competitive compensation through our salary, annual incentive and long-term incentive programs, and a benefits package that promotes employee well-being across all aspects of their lives, including physical, financial, social and emotional wellbeing.
Total Rewards: We provide a market-based competitive compensation through our salary, annual incentive and long-term incentive programs, and a benefits package that promotes employee well-being across all aspects of their lives, including physical, financial, social and emotional wellbeing.
Information concerning our research and development expense is located in Note 1 within Notes to the Consolidated Financial Statements. Regulation. Our activities in the United States are subject to regulation by various government agencies, including the Food and Drug Administration, Federal Trade Commission and the Departments of Agriculture, Commerce and Labor, as well as voluntary regulation by other bodies.
Our activities in the United States are subject to regulation by various government agencies, including but not limited to the Food and Drug Administration, the Federal Trade Commission and the Departments of Agriculture, Commerce and Labor, as well as voluntary regulation by other bodies. Various state and local agencies also regulate our activities.
We also market convenience foods under trademarks and tradenames which include Austin, Bisco, Cheez-It, Club, Luxe, Minueto, Parati, RXBAR, Special K, Toasteds, Town House, Zesta and Zoo Cartoon and beverages under the Trink trademark . One of our subsidiaries is also the exclusive licensee of the Carr’s cracker line in the United States.
We market convenience foods under trademarks and tradenames which include Austin , Bisco , Cheez-It , Club , Luxe , Minueto , Parati , RXBAR , Special K , Toasteds , Town House , Zesta , and Zoo Cartoon .
Pop! for Cocoa Krispies and Rice Krispies cereals and Rice Krispies Treats convenience foods; Tony the Tiger for Kellogg’s Frosted Flakes, Zucaritas, Sucrilhos and Frosties cereals and convenience foods; Toucan Sam for Froot Loops and Froot Rings cereal; Dig ‘Em for Smacks/Honey Smacks cereal; Sunny for Kellogg’s Raisin Bran, Two Scoops and Raisin Bran Crunch cereals; Coco the Monkey for Coco Pops , Choco Krispies and Chocos cereal; Cornelius (aka Cornelio) for Kellogg’s Corn Flakes ; Melvin the Elephant for certain cereal and convenience foods; Chocovore , Poperto, Cerealdo and Sammy the Seal (aka Smaxey the Seal) for certain cereal products; and Mr.
Our trademarks also include logos and depictions of certain animated characters in conjunction with our products, including the characters Snap, Crackle and Pop for use in connection Rice Krispies Treats convenience foods; Tony the Tiger for Zucaritas , Sucrilhos and Frosties cereals and convenience foods; Toucan Sam for Froot Loops and Froot Rings international cereal; Dig ‘Em for Smacks/Honey Smacks international cereal; Zimmy and Zimmy's cereal; Coco the Monkey for Coco Pops , Choco Krispies and Chocos cereal; Cornelius (aka Cornelio) for Kellogg’s Corn Flakes international cereal; Melvin the Elephant for certain cereal, dairy beverages and convenience foods; Chocovore , Poperto , Pops the Bee , and Sammy the Seal (aka Smaxey the Seal) for certain cereal products; and Mr.
ITEM 1. BUSINESS The Company. Kellogg Company, founded in 1906 and incorporated in Delaware in 1922, and its subsidiaries are engaged in the manufacture and marketing of snacks and convenience foods. The address of the principal business office of Kellogg Company is One Kellogg Square, P.O. Box 3599, Battle Creek, Michigan 49016-3599.
ITEM 1. BUSINESS The Company. Kellanova (formerly Kellogg Company), founded in 1906 and incorporated in Delaware in 1922, and its subsidiaries are engaged in the manufacture and marketing of snacks and convenience foods. The address of the principal business office of Kellanova is 412 N. Wells Street, Chicago, Illinois 60654.
These include Diversity Inc., Social Corporate Equity Index, Diversity Best Practice Index and Human Rights Campaign (HRC) Best Places to Work for LGBTQ Equality, to name a few.
These include Diversity Inc., Social Corporate Equity Index, Diversity Best Practice Index and Human Rights Campaign (HRC) Best Places to Work for LGBTQ Equality, to name a few. Training and Development: We invest in ongoing leadership development through programs for future managers, for experienced managers and our executive leadership training program for developing our future leaders.
This work is not new - we’ve been making progress on these topics for many years and have been reporting our results annually through our Corporate Responsibility Report (soon to be called ESG report) and other disclosures since 2009. Each year, we assess which ESG topics are included and highlight progress on our commitments.
This work is not new - we’ve been making progress on these topics for many decades and have been reporting our results annually through our Better Days™ Promise report (formerly Corporate Responsibility Report) and other disclosures since 2009.
Various state and local agencies also regulate our activities. Other agencies and bodies outside of the United States, including those of the European Union and various countries, states and municipalities, also regulate our activities. Environmental Matters.
Other agencies and bodies outside of the United States, including those of the European Union and various countries, states and municipalities, also regulate our activities. Environmental Matters. Our facilities are subject to various U.S. and foreign, federal, state, and local laws and regulations regarding the release of material into the environment and the protection of the environment in other ways.
In North America, we relaunched our “Find your Wings” employee assistance program, to provide more access to valuable Mental Health resources. We also launched our “Lean on Me” program to train employees on how to identify other employees that may be struggling with mental health challenges and pointing them towards our available resources.
In addition, our “Lean on Me” program trains employees on how to identify other employees that may be struggling with mental health challenges and pointing them towards our available resources. We also provide company paid access to gyms and mindfulness resources in many parts of the world.
Lawlor assumed his current position in July 2018. He most recently served as Vice President, European Cereal from November 2017 to June 2018. Mr. Lawlor began his career at Kellogg in 1991, joining as a sales manager in its Dublin office.
He most recently served as Vice President, European Cereal from November 2017 to June 2018. Mr. Lawlor began his career at Kellanova (formerly known as Kellogg Company) in 1991, joining as a sales manager in its Dublin office. Following this, he held a number of senior roles, including running the company’s Middle Eastern business, setting up its Dubai office. Mr.
It addresses physical, financial, social and emotional wellbeing to support our employee’s personal goals. On an ongoing basis, we focus on each aspect of wellbeing and provide useful information, education, tools and resources. For example, Kellogg hosted a global employee Emotional Health event on Mindfulness in acknowledgement of World Mental Health Day.
Our global employee wellbeing framework, "My Total Health," addresses physical, financial, social and emotional wellbeing to support our employees' personal goals. On an ongoing basis, we focus on each aspect of wellbeing and provide useful information, education, tools and resources. In North America, our “Find your Wings” employee assistance program provides access to valuable Mental Health resources.
Our Executive Committee, a committee composed of senior leaders including the Senior Vice President (SVP) of Global Corporate Affairs who reports to the Chairman and CEO, are responsible for successfully implementing the strategy and regularly updating the CEO and Board Committee. Our Chief Sustainability Officer (CSO) reports to the SVP of Global Corporate Affairs.
Our Senior Vice President Chief Global Corporate Affairs Officer, Senior Vice Presid ent Global Supply Chain, Senior Vice President Chief Global Human Resources Officer, Senior Vice President Research and Development and other executives who report to the Chairman and CEO, are responsible for successfully implementing the strategy and regularly updating the CEO and Board Committee.
Raw materials and packaging needed for internationally based operations are available in adequate supply and are sourced both locally and imported from countries other than those where used in manufacturing.
As further discussed herein under Part II, Item 7A, we also use commodity futures and options to hedge some of our costs. 4 Raw materials and packaging needed for internationally based operations are available in adequate supply and are sourced both locally and imported from countries other than those where used in manufacturing.
The slogans The Original & Best, They’re Gr-r-reat! and Follow Your Nose, are used in connection with our ready-to-eat cereals, along with L’ Eggo my Eggo and L’Eggo with Eggo , used in connection with our frozen waffles, pancakes and French toast sticks, and Snack Stacks used in connection with potato crisps are also important Kellogg trademarks.
P or Julius Pringles for Pringles crisps. The slogans L’ Eggo my Eggo and L’Eggo with Eggo are used in connection with our frozen waffles, pancakes and French toast sticks, and Snack Stacks used in connection with potato crisps and crackers are also important Kellanova trademarks.
Health and Wellness: We aim to create a culture where all colleagues feel supported and valued is in line with our corporate mission. The ongoing COVID-19 pandemic has led to unique challenges and we are striving to ensure the health, safety and general well-being of our colleagues.
Health and Wellness: We aim to create a culture where all colleagues feel supported and valued in line with our corporate mission.
He has also been a trustee of the W. K. Kellogg Foundation Trust since 2018. 8 Kurt D. Forche 52 Vice President and Corporate Controller Mr. Forche was appointed Vice President and Corporate Controller, Kellogg Company, in July 2018. Previously, Mr. Forche served as Vice President, Assistant Corporate Controller since December 2016. Mr.
Forche was appointed Vice President and Corporate Controller, Kellanova (formerly known as Kellogg Company), in July 2018. Previously, Mr. Forche served as Vice President, Assistant Corporate Controller since December 2016. Mr.
Mr. Kapoor served in various leadership roles at Mars Inc., starting his career as General Manager, South East Asia and India Mars Multisales in July 2011. Prior to Mars Inc., Mr. Kapoor was with Nokia from 2005 to 2011 and Procter & Gamble from 1993 to 2005. David Lawlor 54 Senior Vice President, Kellogg Company President, Kellogg Europe Mr.
Prior to that, he was Regional President, Asia Pacific, for Mars’ Royal Canin business from January 2015 to December 2016 . Mr. Kapoor served in various leadership roles at Mars Inc., starting his career as General Manager, South East Asia and India Mars Multisales in July 2011. Prior to Mars Inc., Mr.
Following this, he held a number of senior roles, including running the company’s Middle Eastern business, setting up its Dubai office. Mr. Lawlor then served as General Manager of Kellogg Russia from October 2008 to August 2016 and led the integration of United Bakers Group, a local biscuit and cracker manufacturer.
Lawlor then served as General Manager of Kellogg Russia from October 2008 to August 2016 and led the integration of United Bakers Group, a local biscuit and cracker manufacturer. In August 2016, he was appointed Managing Director, UK/ROI where he refocused the company’s efforts to stabilize and grow its core cereal business.
We believe that compliance with existing environmental laws and regulations will not materially affect our consolidated financial condition or our competitive position. Human Capital Resources. On January 1, 2022, we had approximately 31,000 employees. We are also party to numerous collective bargaining agreements. Our human capital objectives include attracting, developing, engaging, rewarding and retaining our employees.
We are not a party to any material proceedings arising under these regulations. We believe that compliance with existing environmental laws and regulations will not materially affect our consolidated financial condition or our competitive position. Human Capital Resources. On December 30, 2023, we had approximately 23,000 employees. The majority of our employees work on a full-time basis.
Equity, Diversity and Inclusion: In 2005, Kellogg established an Office of Diversity & Inclusion. Since this time, our Company has enhanced our strategy to lead with Equity and be known as the Office of Equity, Diversity and Inclusion.
We are also party to numerous collective bargaining agreements. Our human capital objectives include attracting, developing, engaging, rewarding and retaining our employees. Equity, Diversity and Inclusion: In 2005, Kellanova established an Office of Diversity & Inclusion. Since this time, our Company has enhanced our strategy and is currently known as the Office of Equity, Diversity and Inclusion.
Howell was promoted to Executive Director of North American Human Resources in 2011 and subsequently promoted to Senior Vice President of Global Human Resources. 9 Shumit Kapoor 51 Senior Vice President, Kellogg Company President, Kellogg Asia Pacific, Middle East and Africa Mr. Kapoor assumed his current position in July 2020.
She is also a Board Advisor for Pixability and a member of the Executive Leadership Council. 9 Shumit Kapoor 53 Senior Vice President, Kellanova President, Kellanova Asia Pacific, Middle East and Africa Mr. Kapoor assumed his current position in July 2020.
These trademarks include Kellogg’s for cereals, convenience foods and other products, and the brand names of certain ready-to-eat cereals, including All-Bran, Apple Jacks, Cocoa Krispies, Kellogg’s Corn Flakes, Corn Pops, Cracklin’ Oat Bran, Crispix, Eggo, Froot Loops, Kellogg’s Frosted Flakes, Krave, Frosted Krispies, Frosted 4 Mini-Wheats, Mueslix, Kellogg's Raisin Bran, Raisin Bran Crunch , Rice Krispies, Rice Krispies Treats, Smacks/Honey Smacks, Special K, Special K Red Berries and Smart Start in the United States and elsewhere; Sucrilhos, Kellogg's Extra, Radkau, Zoo Cartoon, Müsli , and Choco Krispis for cereals in Latin America; Vector and Two Scoops in Canada; Coco Pops, Choco Krispies, Frosties, Fruit ‘n Fibre, Kellogg’s Crunchy Nut, Krave, Honey Loops, Kellogg’s Extra, Country Store, Smacks, Pops, Honey Bsss, Croco Copters, Chombos, W.K.
These trademarks include Kellogg’s for convenience foods and other products, including the Kellogg's branded noodles business in Africa, and the brand names of certain ready-to-eat international cereals, including Sucrilhos , Zucaritas , Kellogg's Extra , Müsli , and Choco Krispis for cereals in Latin America; Coco Pops , Choco Krispies , Frosties , Fruit ‘n Fibre , Kellogg’s Crunchy Nut , Krave, Kellogg’s Extra , Country Store , Smacks , Pops , Honey Bsss , Zimmy's , Toppas , and Tresor for cereals in Europe; and Froot Ring, Chocos , Chex , Guardian , Just Right , Sultana Bran , Frosties , Rice Bubbles , Nutri-Grain , and Sustain for cereals in Asia and Australia.
Additionally, numerous leaders are accountable for achieving specific corporate responsibility commitments, based on their roles. Raw Materials. Agricultural commodities, including corn, wheat, rice, potato flakes, vegetable oils, sugar and cocoa, are the principal raw materials used in our products. Cartonboard, corrugate, and plastic are the principal packaging materials used by us.
The Councils ensure execution on priority strategies to maximize environmental and social performance, share best practices to ensure we are progressing against our commitments. Raw Materials. Agricultural commodities, including corn, wheat, rice, potato flakes, vegetable oils, sugar and cocoa, are the principal raw materials used in our products.
Our vision is a good and just world where people are not just fed, but fulfilled. Our purpose is creating better days, and a place at the table for everyone, through our trusted food brands. Our vision and purpose are integrated into our Deploy For Growth business strategy.
Kellanova’s vision is to be the world’s best snacks-led powerhouse, unleashing the full potential of our differentiated brands and passionate people. Our purpose is creating better days, and a place at the table for everyone, through our trusted food brands.
Unless otherwise specified or indicated by the context, “Kellogg,” the "Company," “we,” “us” and “our” refer to Kellogg Company, its divisions and subsidiaries. Financial Information About Segments. Information on segments is located in Note 16 within Notes to the Consolidated Financial Statements. Principal Products.
Unless otherwise specified or indicated by the context, “Kellanova,” the "Company," “we,” “us” and “our” refer to Kellanova, its divisions and subsidiaries. On October 2, 2023, the Company completed the separation of its North America cereal business resulting in two independent companies, Kellanova and WK Kellogg Co.
Although we are unable to predict the impact to our ability to source these materials and services in the future, we expect supply pressures, supply chain and logistics delays, and other disruptions to continue through 2022. As further discussed herein under Part II, Item 7A, we also use commodity futures and options to hedge some of our costs.
Although we are unable to predict the impact to our ability to source these materials and services in the future, supply pressures are generally decreasing, though weather and geopolitical issues are resulting in other disruptions and logistical delays into 2024.
Amaya held various marketing roles at Unilever Andina in the personal care division. Amit Banati 53 Senior Vice President and Chief Financial Officer Mr. Banati has been Senior Vice President, Chief Financial Officer and Principal Financial Officer, Kellogg Company, since July 2019. Mr.
He was promoted to Vice President and General Manager for Mexico in October 2016. In November 2019, Mr. Amaya was promoted to SVP and President Kellanova Latin America. Prior to Kellanova, Mr. Amaya held various marketing roles at Unilever Andina in the personal care division . Kris Bahner 54 Senior Vice President & Chief Global Corporate Affairs Officer, Kellanova Ms.
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Our cereals and cereal bars are generally marketed under the Kellogg’s name, with some under the Kashi and Bear Naked brands. Our frozen foods are marketed under the Eggo and Morningstar Farms brands.
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As a result of the distribution, Kellanova shareholders of record on September 21, 2023, received one share of WK Kellogg Co common stock for every four shares of Kellanova common stock. Reported results were prepared in accordance with U.S.
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Our ESG leadership in areas like Nourishing with our Foods, Feeding People in Need, Nurturing our Planet, and Living our Founder's Values are key to how we bring our Vision and Purpose to life.
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GAAP, include all net sales and expenses recognized during the periods, and reflect WK Kellogg Co as discontinued operations for all periods presented. All amounts, percentages and disclosures for all periods presented reflect only the continuing operations of Kellanova unless otherwise noted. See the discussion in Item 1A. Risk Factors, Item 7.
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We also report against the Sustainability Accounting Standards Board (“SASB”) and Global Reporting Initiative ("GRI") reporting frameworks, as well as many other industry disclosures like CDP and the Dow Jones Sustainability Index.
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Management's Discussion and Analysis of Financial Condition and Results of Operations, and in Note 2 within Notes to the Consolidated Financial Statements, which are located herein under Part II, Item 8. Financial Information About Segments. Information on segments is located in Note 18 within Notes to the Consolidated Financial Statements. Principal Products.
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In 2021, Kellogg’s sustainability performance is within the top 15% of our industry according to the 2021 S&P Global ESG Yearbook, making Kellogg among the world’s highest performing sustainable companies. Our Commitments. Kellogg’s global ESG strategy, Kellogg’s® Better Days™, has helped make billions of days better for people in need.
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Our vision and purpose are brought to life through our Better Days™ Promise, our promise to advance sustainable and equitable access to food by addressing the intersection of wellbeing, hunger, sustainability, and equity, diversity and inclusion (ED&I) for 4 billion people by the end of 2030 (from a 2015 baseline).
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In 2019, Kellogg expanded our commitments again to increase ambition, capture a broader set of goals, and align to the United Nations Sustainable Development Goals. Kellogg is addressing food security and creating Better Days for 3 billion people by the end of 2030, from a 2015 baseline.
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The information contained in our report is not incorporated by reference herein or otherwise made a part of this Annual Report on Form 10-K or any of our other filings with the Securities and Exchange Commission. Our Commitments.
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To do so, we’re focused on the interconnected issues of wellbeing, hunger relief and climate resiliency to drive positive change for people, communities and the planet.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThere are a number of trends in consumer preferences which may impact us and the industry as a whole. These include changing consumer dietary trends and the availability of substitute products. Our success is dependent on anticipating changes in consumer preferences and on successful new product and process development and product relaunches in response to such changes.
Biggest changeOur consolidated financial results and demand for our products are dependent on the successful development of new products and processes, identification of changing consumer and customer preferences and behaviors, and meeting these preferences and behaviors. There are a number of trends in consumer preferences which may impact us and the industry as a whole.
In addition, larger retailers have the scale to develop supply chains that permit them to operate with reduced inventories or to develop and market their own private label products. If we are unable to use our scale, marketing expertise, product innovation and category leadership positions to respond, our profitability or volume 16 growth could be negatively affected.
In addition, larger retailers have the scale to develop supply chains that permit them to operate with reduced inventories or to develop and market their own private label products. If we are unable to use our scale, marketing expertise, product innovation and category leadership positions to respond, our profitability or volume growth could be negatively affected.
Ongoing operational issues are likely to occur when carrying out major production, procurement, or logistical changes and these, as well as any failure by us to achieve our planned cost savings and efficiencies, could have a material adverse effect on our business and consolidated financial position and on the consolidated results of our operations and profitability.
Ongoing operational issues are likely to occur when carrying out major production, procurement, manufacturing or logistical changes and these, as well as any failure by us to achieve our planned cost savings and efficiencies, could have a material adverse effect on our business and consolidated financial position and on the consolidated results of our operations and profitability.
Accordingly, we might fail to anticipate consumer preferences with respect to dietary trends or purchasing behaviors, invest sufficiently in maintaining, extending and expanding our brand image or achieve the desired efforts of our marketing efforts or use data-driven marketing and advertising to reach consumers at the right time with the right message.
Accordingly, we might fail to anticipate consumer preferences with respect to dietary trends or purchasing behaviors, invest sufficiently in maintaining, extending and expanding our brand image or achieve the desired effects of our marketing efforts or use data-driven marketing and advertising to reach consumers at the right time with the right message.
If we do not succeed in offering products that consumers want to buy, our sales and market share will decrease, resulting in reduced profitability. If we are unable to accurately predict which shifts in consumer preferences will be long-lasting, or are unable to introduce new and improved products to satisfy those preferences, our sales will decline.
If we do not succeed in offering 16 products that consumers want to buy, our sales and market share will decrease, resulting in reduced profitability. If we are unable to accurately predict which shifts in consumer preferences will be long-lasting, or are unable to introduce new and improved products to satisfy those preferences, our sales will decline.
The carrying value of other intangibles represents the fair value of trademarks, trade names, and other acquired intangibles as of the acquisition date. Goodwill and other acquired intangibles expected to contribute indefinitely to our cash flows are not 19 amortized, but must be evaluated by management at least annually for impairment.
The carrying value of other intangibles represents the fair value of trademarks, trade names, and other acquired intangibles as of the acquisition date. Goodwill and other acquired intangibles expected to contribute indefinitely to our cash flows are not amortized, but must be evaluated by management at least annually for impairment.
In addition, we must comply with increasingly complex and rigorous regulatory standards enacted to protect business and personal data in the United States and other jurisdictions regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data.
In addition, we must comply with increasingly complex and rigorous regulatory standards enacted to protect business and personal information in the United States and other jurisdictions regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal information.
Brand recognition and loyalty can also be impacted by the effectiveness of our advertising campaigns, marketing programs and sponsorships, as well as our use of social media. If we do not maintain the favorable perception of our brands, our results could be negatively impacted.
Brand recognition and loyalty can also be impacted by the effectiveness of our advertising campaigns, marketing programs, influencers and sponsorships, as well as our use of social media. If we do not maintain the favorable perception of our brands, our results could be negatively impacted.
The marketing of food products has come under increased regulatory scrutiny in recent years, and the food industry has been subject to an increasing number of proceedings and claims relating to alleged false or deceptive marketing under federal, state and foreign laws or regulations.
The marketing of food products has come under increased regulatory scrutiny in recent years, and the food industry has been subject to an increasing number of proceedings and claims relating to alleged false or deceptive labeling and marketing under federal, state and foreign laws or regulations.
In addition, these alternative retail channels may create consumer price deflation, affecting our large retail and wholesale customer relationships and presenting additional challenges to increasing prices in response to commodity or other cost increases.
In addition, these alternative retail channels may create consumer price deflation, affecting our large retail and wholesale customer relationships and presenting additional challenges to 17 increasing prices in response to commodity or other cost increases.
As a result, climate change as well as actions taken to mitigate climate change could negatively affect our business and operations. 17 Risks Related to Our Operations A shortage in the labor pool, failure to successfully negotiate collectively bargained agreements, or other general inflationary pressures or changes in applicable laws and regulations could increase labor cost, which could have a material adverse effect on our consolidated operating results or financial condition .
As a result, climate change as well as actions taken to mitigate climate change could negatively affect our business and operations. 18 Risks Related to Our Operations A shortage in the labor pool, failure to successfully negotiate collectively bargained agreements, or other general inflationary pressures or changes in applicable laws and regulations could increase labor cost, which could have a material adverse effect on our consolidated operating results or financial condition .
Additionally, changes in immigration laws and policies could also make it more difficult for us to recruit or relocate skilled employees. Risks Related to Our Industry Our results may be materially and adversely impacted as a result of increases in the price of raw materials, including agricultural commodities, packaging, fuel and labor .
Additionally, changes in regional preferences, immigration laws and policies could also make it more difficult for us to recruit or relocate skilled employees. Risks Related to Our Industry Our results may be materially and adversely impacted as a result of increases in the price of raw materials, including agricultural commodities, packaging, fuel and labor .
Most of our competitors have substantial financial, marketing and other resources, and some of our competitors may spend more aggressively on advertising and promotional activities than we do.
Most of our competitors have substantial financial, marketing, sales and other resources, and some of our competitors may spend more aggressively on advertising and promotional activities than we do.
Our information technology systems, and the systems of the parties we communicate and collaborate with, may be vulnerable to a variety of interruptions, as a result of many of our employees working remotely, updating our enterprise platform or due to events beyond our or their control, including, but not limited to, network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by common hackers, criminal groups or nation-state organizations or social-activist (hacktivist) organizations, geopolitical events, natural disasters, a pandemic illness (such as COVID-19), failures or impairments of telecommunications networks, or other catastrophic events.
Our information technology systems, and the systems of the parties we communicate and collaborate with, may be vulnerable to a variety of interruptions, such as a result of our employees working remotely, the updating of our enterprise platform or due to events beyond our or their control, including, but not limited to, network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by common hackers, criminal groups or nation-state organizations or social-activist (hacktivist) organizations, geopolitical events, natural disasters, a pandemic illness, failures or impairments of telecommunications networks, or other catastrophic events.
In particular, increasing regulation of fuel emissions could substantially increase the distribution and supply chain costs associated with our products. Lastly, consumers and customers may put an increased priority on purchasing products that are sustainably grown and made, requiring us to incur increased costs for additional transparency, due diligence and reporting.
In particular, increasing regulation of fuel emissions could substantially increase the distribution and supply chain costs associated with our products. In addition, consumers and customers may put an increased priority on purchasing products that are sustainably grown and made, requiring us to incur increased costs for additional transparency, due diligence and reporting.
Several other states have introduced or passed similar legislation to the CCPA and CPRA, which may impose varying standards and requirements on our data collection, use and processing activities. Our efforts to comply with privacy and data protection laws, including the GDPR, CCPA and CPRA, may impose significant costs and challenges that are likely to increase over time.
In the United States, several other states have introduced or passed similar privacy legislation, which may impose varying standards and requirements on our data collection, use and processing activities. Our efforts to comply with privacy and data protection laws, including the GDPR, CCPA and CPRA, may impose significant costs and challenges that are likely to increase over time.
Our withdrawal liability from a multiemployer plan would depend, in part, on the extent of the plan’s funding of vested benefits. In the ordinary course of our renegotiation of collective bargaining agreements with labor unions that maintain these plans, we may decide to discontinue participation in a plan, and in that event, we could face a withdrawal liability.
Our withdrawal liability obligation to a multiemployer plan would depend, in part, on the extent of the plan’s funding of vested benefits. In the ordinary course of our renegotiation of collective bargaining agreements with labor unions that maintain these plans, we may decide to discontinue participation in a plan, and in that event, we could face a withdrawal liability.
If our access to such financing was unavailable or reduced, or if such financing were to become significantly more expensive for any reason, we may not be able to fund daily operations, which would cause material harm to our business or could affect our ability to 18 operate our business as a going concern.
If our access to such financing was 19 unavailable or reduced, or if such financing were to become significantly more expensive for any reason, we may not be able to fund daily operations, which would cause material harm to our business or could affect our ability to operate our business as a going concern.
In addition, if the Company's suppliers or customers experience such a breach or unauthorized disclosure or system failure, their businesses could be disrupted or otherwise negatively affected, which may result in a disruption in the Company's supply chain or reduced customer orders, which would adversely affect the Company's business operations.
In addition, if the Company's suppliers or customers experience such a security incident, security breach or unauthorized disclosure or system failure, their businesses could be disrupted or otherwise negatively affected, which may result in a disruption in the Company's supply chain or reduced customer orders, which would adversely affect the Company's business operations.
If the Company suffers a loss as a result of a breach or other breakdown in its technology, including such cyber-attacks, privacy breaches, data breaches, issues with or errors in system maintenance or security, migration of applications to the cloud, power outages, hardware or software failures, denial of service, telecommunication or other incident involving one of the Company's vendors, that result in unauthorized disclosure or significant unavailability of business, financial, personal or stakeholder information, the Company may suffer reputational, 22 competitive and/or business harm and may be exposed to legal liability and government investigations, which may adversely affect the Company's results of operations and/or financial condition.
If the Company suffers a loss as a result of a breach or other breakdown in its technology, including such cyber incidents, security incidents, privacy breaches, data breaches, security breaches, issues with or errors in system 23 maintenance or security, migration of applications to the cloud, power outages, hardware or software failures, denial of service, telecommunication or other incident involving one of the Company's vendors, that result in unauthorized disclosure or significant unavailability of business, financial, personal or stakeholder information, the Company may suffer reputational, competitive and/or business harm and may be exposed to legal liability and government investigations, which may adversely affect the Company's results of operations and/or financial condition.
The need to comply with new, evolving or revised tax, environmental, food quality and safety, labeling or other laws or regulations, or new, evolving or changed interpretations or enforcement of existing laws or regulations, may have a material adverse effect on our business and results of operations.
The need to comply with new, evolving or revised tax, environmental, food quality and safety, labeling, data privacy, or other laws or regulations, or new, evolving or changed interpretations or enforcement of existing laws or regulations, may have a material adverse effect on our business and results of operations.
The Company offers promotions, rebates, customer loyalty and other programs through which it may receive personal information, and it or its vendors could experience cyber-attacks, privacy breaches, data breaches or other incidents that result in unauthorized disclosure of consumer, customer, employee or Company information.
The Company offers promotions, rebates, customer loyalty and other programs through which it may receive personal information, and it or its vendors could experience cyber incidents, security incidents, privacy breaches, data breaches, security breaches or other incidents that result in unauthorized disclosure of consumer, customer, employee or Company information.
Our operations face significant foreign currency exchange rate exposure and currency restrictions which could negatively impact our operating results . We hold assets and incur liabilities, earn revenue and pay expenses in a variety of currencies other than the U.S. dollar, including the euro, British pound, Australian dollar, 24 Canadian dollar, Mexican peso, Brazilian real, Nigerian naira, and Russian ruble.
Our operations face significant foreign currency exchange rate exposure and currency restrictions which could negatively impact our operating results . We hold assets and incur liabilities, earn revenue and pay expenses in a variety of currencies other than the U.S. dollar, including the euro, British pound, Australian dollar, Canadian dollar, Mexican peso, Brazilian real, and Nigerian naira.
Factors that are hard to predict or beyond our control, such as product or raw material scarcity, weather (including any potential effects of climate change), natural disasters, water availability, fires or explosions, terrorism, political unrest, government restrictions, mandates or shutdowns, tariffs and other trade restrictions, cybersecurity breaches, health pandemics, such as the COVID-19 pandemic, disruptions in logistics, loss or impairment of key manufacturing sites, supplier capacity constraints, or strikes, could damage or disrupt our operations or our suppliers', their suppliers or our contract manufacturers' operations.
Factors that are hard to predict or beyond our control, such as product or raw material scarcity, workforce disruptions, weather (including any potential effects of climate change), natural disasters, water availability, fires or explosions, terrorism, political unrest, government restrictions, mandates or shutdowns, tariffs and other trade restrictions, cybersecurity breaches, health pandemics, disruptions in logistics, loss or impairment of key manufacturing sites, supplier capacity constraints, or strikes, could damage or disrupt our operations or our suppliers', their suppliers or our contract manufacturers' operations.
These events could compromise our confidential information, impede or interrupt our business operations, and may result in other negative consequences, including remediation costs, loss of revenue, litigation and reputational damage. Furthermore, if a breach or other breakdown results in disclosure of confidential or personal information, we may suffer reputational, competitive and/or business harm.
These events could compromise our confidential information, impede or interrupt our business operations, and may result in other negative consequences, including remediation costs, loss of revenue, litigation and reputational damage. If a security incident, breach or other breakdown results in disclosure of confidential or personal information, we may suffer reputational, competitive and/or business harm.
While we have implemented administrative and technical controls and taken other preventive actions, such as the maintenance of an information security program that includes updating our technology and security policies, insurance, employee training, and monitoring and routinely testing our information technology systems to reduce the risk of cyber incidents and protect our information technology, they may be insufficient to prevent physical and electronic break-ins, cyber-attacks or other security breaches to our computer systems.
While we have implemented physical, administrative, and technical controls and taken other preventive actions, such as the maintenance of an information security program that includes updating our technology and security policies, insurance, employee training, and monitoring and routinely testing our information technology systems to reduce the risk of cyber incidents and protect our information technology; however, these measures may be insufficient to prevent physical and electronic break-ins, cyber-attacks or other security breaches to our computer systems.
Our labor costs include the cost of providing benefits for employees. We sponsor a number of benefit plans for employees in the United States and various foreign locations, including pension, retiree health and welfare, active health care, severance and other postemployment benefits. We also participate in multiemployer pension plans for certain of our manufacturing locations.
Our labor costs include the cost of providing benefits for employees. We sponsor a number of benefit plans for employees in the United States and various foreign locations, including pension, retiree health and welfare, active health care, severance and other post-employment benefits. We also participate in multiemployer pension plans for certain of our manufacturing locations.
If financial institutions were to terminate their participation in the Monetization Programs and we are not able to modify related customer payment terms, working capital could be negatively impacted. Additionally, working capital could be negatively impacted if we shorten our supplier payment terms as a result of supplier negotiations.
If financial institutions were to terminate their participation in the Monetization Programs and we are not able to modify related customer payment terms, working capital could be negatively impacted. Additionally, working capital could be negatively impacted if we shorten our supplier payment terms as a result of supplier negotiations or as a result of regulations regarding payment terms.
Those risks include (i) compliance with U.S. laws affecting operations outside of the United States, such as OFAC trade sanction regulations and Anti-Boycott regulations, (ii) compliance with anti-corruption laws, including the FCPA and UK Bribery Act (the “UKBA”), (iii) compliance with antitrust and competition laws, data privacy laws, and a variety of other local, national and multi-national regulations and laws in multiple regimes, (iv) changes in tax laws, interpretation of tax laws and tax audit outcomes, (v) fluctuations or devaluations in currency values, especially in emerging markets, (vi) changes in capital controls, including currency exchange controls, government currency policies or other limits on our ability to import raw materials or finished product or repatriate cash from outside the United States, (vii) changes in local regulations and laws, the lack of well-established, reliable and/or impartial legal systems in certain countries in which we operate and the uncertainty of enforcement of remedies in such jurisdictions, and foreign ownership restrictions and the potential for nationalization or expropriation of property or other resources, (viii) laws relating to information security, privacy (including the GDPR), cashless payments, and consumer protection, (ix) uncertainty relating to Brexit and its impact on the local and international markets, the flow of goods and materials across borders, and political environments, (x) discriminatory or conflicting fiscal policies, (xi) challenges associated with cross-border product distribution, (xii) increased sovereign risk, such as default by or deterioration in the economies and credit worthiness of local governments, (xiii) varying abilities to enforce intellectual property, contractual, and other legal rights, (xiv) greater risk of uncollectible accounts and longer collection cycles, (xv) loss of ability to manage our operations in certain markets which could result in the deconsolidation of such businesses, (xvi) design and implementation of effective control environment processes across our diverse operations and employee base, (xvii) imposition of more or new tariffs, quotas, trade barriers, price controls, and similar restrictions in the countries in which we or our suppliers or manufacturers 23 operate or regulations, taxes or policies that might negatively affect our sales, and (xviii) changes in trade policies and trade relations.
Those risks include (i) compliance with U.S. laws affecting operations outside of the United States, such as OFAC trade sanction regulations and Anti-Boycott regulations, (ii) compliance with anti-corruption laws, including the FCPA and UK Bribery Act (the “UKBA”), (iii) compliance with antitrust and competition laws, data privacy laws, and a variety of other local, national and multi-national regulations and laws in multiple regimes, (iv) changes in tax laws, interpretation of tax laws and tax audit outcomes, (v) fluctuations or devaluations in currency values, especially in emerging markets, (vi) changes in capital controls, including currency exchange controls, government currency policies or other limits on our ability to import raw materials or finished product or repatriate cash from outside the United States, (vii) changes in local regulations and laws, the lack of well-established, reliable and/or impartial legal systems in certain countries in which we operate and the uncertainty of enforcement of remedies in such jurisdictions, and foreign ownership restrictions and the potential for nationalization or expropriation of property or other resources, (viii) laws relating to information security, privacy (including the GDPR), cashless payments, and consumer protection, (ix) the ongoing longer-term impact of changes in international trade policies (including Brexit) on the local and international markets, the flow of goods and materials across borders, and political environments, (x) discriminatory or conflicting fiscal policies, (xi) challenges associated with cross-border product distribution, (xii) increased sovereign risk, such as default by or deterioration in the economies and credit worthiness of local governments, (xiii) varying abilities to enforce intellectual property, contractual, and other legal rights, (xiv) greater risk of uncollectible accounts and longer collection cycles, (xv) loss of ability to manage our operations in certain markets which could result in the deconsolidation of such businesses, (xvi) design and implementation of effective control environment processes across our diverse operations and employee base, (xvii) imposition of more or new tariffs, quotas, trade barriers, price controls, and similar restrictions in the countries in which we or our suppliers or manufacturers operate or regulations, taxes or policies that might negatively affect our 24 sales, (xviii) changes in trade policies and trade relations, (xix) greater risk of uncollectible accounts or trade receivables and longer collection cycles, and (xx) political sentiment impacting global trade, including the willingness of non-U.S. consumers to purchase from U.S. corporations.
The growing use of social and digital media platforms by consumers, Kellogg and third parties increases the speed and extent that information or misinformation and opinions can be shared.
The growing use of social and digital media platforms by consumers, Kellanova and third parties increases the speed and extent that information or misinformation and opinions can be shared.
We are also regulated with respect to matters such as licensing requirements, trade and pricing practices, tax, anti-corruption standards, advertising and claims, and environmental matters.
We are also regulated with respect to matters such as licensing requirements, trade and pricing practices, tax, anti-corruption standards, advertising and claims, data privacy, and environmental matters.
The changing retail environment and the growing presence of alternative retail channels, could negatively impact our sales and profits . Our businesses are largely concentrated in the traditional retail grocery trade. Our largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for approximately 19% of consolidated net sales during 2021, comprised principally of sales within the United States.
The changing retail environment and the growing presence of alternative retail channels, could negatively impact our sales and profits . Our businesses are largely concentrated in the traditional retail grocery trade. Our largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for approximately 15% of consolidated net sales during 2023, comprised principally of sales within the United States.
In addition, due to our varied and geographically diverse consumer base, we must be responsive to local consumer needs, including with respect to when and how consumers consume food products and their desire for premium or value offerings, provide an array of products that satisfy the broad spectrum of consumer preferences.
In addition, due to our varied and geographically diverse consumer base, we must be responsive to local consumers, including when and how consumers consume food products and their desire for premium or value offerings and whether to provide an array of products that satisfy the broad spectrum of consumer preferences.
Future acquisitions of foreign companies or new foreign ventures would subject us to local laws and regulations and could potentially lead to risks related to, among other things, increased exposure to foreign exchange rate changes, government price control, repatriation of profits and liabilities relating to the U.S.
Future acquisitions of foreign companies or new foreign ventures would subject us to local laws and regulations and could potentially lead to risks related to, among other things, increased exposure to foreign exchange rate changes, government price control, repatriation of profits and liabilities relating to the U.S. Foreign Corrupt Practices Act (the “FCPA”).
For suppliers participating in the Accounts Payable Program, financial institutions may terminate their participation or we could experience a downgrade in our credit rating that could result in higher costs to suppliers.
For suppliers participating in the Accounts Payable Tracking Systems, financial institutions may terminate their participation or we could experience a downgrade in our credit rating that could result in higher costs to suppliers.
Any failure to execute revenue growth management in accordance with our plans could adversely affect our business or financial condition. Our results may be negatively impacted if consumers do not maintain their favorable perception of our brands . We have a number of iconic brands with significant value.
Any failure to execute revenue growth management in accordance with our plans, including as a result of our revenue growth management process, could adversely affect our business or financial condition. 12 Our results may be negatively impacted if consumers do not maintain their favorable perception of our brands . We have a number of iconic brands with significant value.
Structural and Organizational Risks If we pursue strategic acquisitions, alliances, divestitures or joint ventures, we may not be able to successfully consummate favorable transactions or successfully integrate acquired businesses . From time to time, we may evaluate potential acquisitions, alliances, divestitures or joint ventures that would further our strategic objectives.
If we pursue strategic acquisitions, alliances, divestitures or joint ventures, we may not be able to successfully consummate favorable transactions or successfully integrate acquired businesses . From time to time, we may evaluate potential acquisitions, alliances, divestitures or joint ventures that would further our strategic objectives.
Despite our efforts to control costs, we have seen inflationary cost pressures rise in our UK business this year, as we have also experienced in other markets.
Despite our efforts to control costs, we have continued to see inflationary cost pressures rise in our UK business this year, as we have also experienced in other markets.
Financial institutions may be negatively impacted by economic conditions and may consolidate or cease to do business which could result in a tightening in the credit markets, a low level of liquidity in many financial markets, and increased volatility in fixed income, credit, currency and equity markets.
Financial institutions may be negatively impacted by economic conditions, including rising inflation and interest rates, and may consolidate or cease to do business which could result in a tightening in the credit markets, a low level of liquidity in many financial markets, and increased volatility in fixed income, credit, currency and equity markets.
Agricultural commodities, including corn, wheat, rice, potato flakes, vegetable oils, sugar and cocoa, are the principal raw materials used in our products. Cartonboard, corrugated, and plastic are the principal packaging materials used by us.
Agricultural commodities, including vegetable oils, wheat, corn, sugar, fruits and nuts, potato flakes, rice and cocoa, are the principal raw materials used in our products. Cartonboard, corrugated, and flexible packaging are the principal packaging materials used by us.
Foreign Corrupt Practices Act (the “FCPA”). 14 With respect to proposed divestitures of assets or businesses, we may encounter difficulty in finding acquirers or alternative exit strategies on terms that are favorable to us, which could delay the accomplishment of our strategic objectives, or our divestiture activities may require us to recognize impairment charges.
With respect to proposed divestitures of assets or businesses, we may encounter difficulty in finding acquirers or alternative exit strategies on terms that are favorable to us, which could delay the accomplishment of our strategic objectives, or our divestiture activities may require us to recognize impairment charges.
The COVID-19 pandemic has increased volatility and pricing in the capital markets and as a result, we may not have access to preferred sources of liquidity when needed or on terms we find acceptable, causing our borrowing costs could increase. An economic or credit crisis could impair credit availability and our ability to raise capital when needed.
Adverse macroeconomic conditions have increased volatility and pricing in the capital markets and as a result, we may not have access to preferred sources of liquidity when needed or on terms we find acceptable, causing our borrowing costs could increase. An economic or credit crisis could impair credit availability and our ability to raise capital when needed.
Promoting and protecting the value of these brands is critical to the success of our business. Brand value is based in large part on consumer perceptions. Success in promoting and enhancing brand value depends in large part on our ability to provide high-quality products.
Promoting and protecting the value of these brands is critical to the success of our business. Brand value is primarily based on consumer perceptions. Successful promotions and brand value enhancement depends in large part on our ability to provide high-quality products.
Our future results and our ability to maintain or improve our competitive position will depend on our capacity to gauge the direction of our key markets and upon our ability to successfully identify, develop, manufacture, market and sell new or improved products in these changing markets.
Our future results and our ability to maintain or improve our competitive position will depend on our capacity to gauge the direction of our key markets and upon our ability to successfully identify, develop, manufacture, market and sell new or improved products in these changing markets, including through the expansion into complementary product categories.
A significant product recall or product liability case could also result in adverse publicity, damage to our reputation, and a loss of consumer confidence in our food products, which could have a material adverse effect on our business results and the value of our brands.
Allegations of consumer fraud may result in fines, settlements and litigation expenses. A significant product recall, product liability or consumer fraud case could also result in adverse publicity, damage to our reputation, and a loss of consumer confidence in our food products, which could have a material adverse effect on our business results and the value of our brands.
Brand value could diminish significantly due to a number of factors, including consumer perception that we, or any of our employees or agents, have acted in an irresponsible manner, adverse publicity about our labor relations (whether or not valid), our products (whether or not valid), our failure to maintain the quality of our products, the failure of our products to deliver consistently positive consumer experiences, the products becoming unavailable to consumers, or the failure to meet the nutrition expectations of our products or particular ingredients in our products (whether or not valid), including whether certain of our products are perceived to contribute to obesity.
Brand value could diminish significantly due to a number of factors, including consumer perception that we, or any of our employees or agents, have acted in an irresponsible manner, adverse publicity about our labor relations (whether or not valid), our products (whether or not valid), sponsorship or endorsement relationships (whether or not valid), our failure to maintain the quality of our products, the failure of our products or promotions to deliver consistently positive consumer experiences, the products becoming unavailable to consumers, or the failure to meet the nutrition expectations of our products or particular ingredients in our products (whether or not valid), including the perception of healthfulness of our products or their ingredients.
Customer and consumer demand for our products may be impacted by the negative impacts caused by pandemics and public health crises (including the COVID-19 pandemic), recession, financial and credit market disruptions, government shutdowns or other economic downturns in the United States or other nations.
C ustomer and consumer demand for our products may be impacted by the negative impacts caused by pandemics and public health crises, recession, financial and credit market disruptions, government shutdowns or other economic downturns in the United States or other nations.
In addition, our ability to achieve our strategic and operating goals depends on our ability to identify, recruit, hire, train and retain qualified individuals, including individuals with e-commerce, digital marketing and data analytics capabilities.
In addition, our ability to achieve our strategic and operating goals depends on our ability to identify, recruit, hire, train and retain qualified individuals, including, for example, individuals with e-commerce, digital marketing and data analytics capabilities and skilled labor in our manufacturing facilities.
Deteriorating economic conditions in our major markets affected by the COVID-19 pandemic, such as increased unemployment, decreases in disposable income, declines in consumer confidence, or economic slowdowns or recessions could result in reductions in sales of our products, reduced acceptance of innovations, and increased price competition.
Deteriorating economic conditions in our major markets, such as inflation, economic slowdowns or recessions, increased unemployment, decreases in disposable income, declines in consumer confidence, could result in reductions in sales of our products, reduced acceptance of innovations, and increased price competition.
Changes in legal or regulatory requirements (such as new food safety requirements and revised nutrition facts labeling and serving size regulations), or evolving interpretations of existing legal or regulatory requirements, may result in increased compliance costs, capital expenditures and other financial obligations that could adversely affect our business or financial results.
Changes in legal or regulatory requirements (such as new food safety requirements and revised nutrition facts labeling, including front of pack labeling, and serving size regulations, and new corporate sustainability reporting requirements in the EU and elsewhere), or evolving interpretations of existing legal or regulatory requirements, may result in increased compliance costs, capital expenditures and other financial obligations that could adversely affect our business or financial results.
No other customer accounted for greater than 10% of net sales in 2021. During 2021, our top five customers, collectively, including Wal-Mart, accounted for approximately 32% of our consolidated net sales and approximately 53% of U.S. net sales.
No other customer accounted for greater than 10% of net sales in 2023. During 2023, our top five customers, collectively, including Wal-Mart, accounted for approximately 26% of our consolidated net sales and approximately 46% of U.S. net sales.
Evolving tax, environmental, food quality and safety or other regulations or failure to comply with existing licensing, labeling, trade, food quality and safety and other regulations and laws could have a material adverse effect on our consolidated financial condition .
Evolving tax, advertising, environmental, licensing, labeling, trade, food quality and safety, intellectual property, data privacy, artificial intelligence, or other regulations or failure to comply with existing regulations and laws could have a material adverse effect on our consolidated financial condition.
We may not be able to locate suitable replacements for any key employees who terminate their employment or become ill as a result of COVID-19, or offer employment to potential replacements on reasonable terms, each of which may adversely affect our business and financial results .
We may not be able to locate suitable replacements for any key employees who terminate their employment, or offer employment to potential replacements on reasonable terms, each of which may adversely affect our business and 15 financial results.
Food processing equipment at major domestic and international facilities are regularly fueled by electricity, oil, natural gas or propane, which are obtained from local utilities or other local suppliers. Short-term stand-by propane and/or oil storage exists at several plants for use in case of interruption in natural gas supplies.
Food processing equipment at our facilities is regularly fueled by natural gas or propane, as well as electricity, oil and solar, which are obtained from local utilities, other local suppliers or onsite. Short-term stand-by propane and/or oil storage exists at several plants for use in case of interruption in natural gas supplies.
Our activities or products, both in and outside of the United States, are subject to regulation by various federal, state, provincial and local laws, regulations and government agencies, including the U.S. Food and Drug Administration, U.S. Federal Trade Commission, the U.S.
Our 21 activities and products, including our operation of our manufacturing facilities, both in and outside of the United States, are subject to regulation by various federal, state, provincial and local laws, regulations and government agencies, including the U.S. Food and Drug Administration, U.S. Federal Trade Commission, the U.S. Departments of Agriculture, Commerce and Labor, U.S.
All of these factors could result in increased costs or decreased revenues, and could materially and adversely affect our product sales, financial condition and results of operations. There may be uncertainty as a result of key global events during 2022.
All of these factors could result in increased costs or decreased revenues, and could materially and adversely affect our product sales, financial condition and results of operations. There may be uncertainty as a result of key global events during 2023 that are expected to continue throughout 2024.
The loss of any large customer or severe adverse impact on the business operations of any large customer for an extended length of time could negatively impact our sales and profits.
As a result of the consolidated nature of the retail environment, the loss of any large customer or severe adverse impact on the business operations of any large customer for an extended length of time could negatively impact our sales and profits.
The cost of such commodities may fluctuate widely due to government policy, regulation, and/or shutdown, import and export requirements (including tariffs), global geopolitical conditions, general economic conditions (including inflationary pressures), drought and other weather conditions (including the potential effects of climate change), a pandemic illness (such as the COVID-19 outbreak) or other unforeseen circumstances.
The cost of such commodities may fluctuate widely due to government policy, regulation, and/or shutdown, import and export requirements (including tariffs), global geopolitical conditions (including war and conflicts, such as the conflicts in Ukraine and the Middle East), general economic conditions (including inflationary pressures), sanctions, drought and other weather conditions (including the potential effects of climate change), a pandemic illness, environmental or other sustainability regulation, or other unforeseen circumstances.
In addition, if certain of our lenders experience difficulties that render them unable to fund future draws on the facilities, we may not be able to access all or a portion of these funds, which could have similar adverse consequences.
In addition, if certain of our lenders experience difficulties that render them unable to fund future draws on the facilities, we may not be able to access all or a portion of these funds, which could have similar adverse consequences. We utilize extended payment terms for customers supplemented with receivable sales programs (or “monetization programs”).
Also, if these alternative retail channels, such as e-commerce retailers were to take significant share away from traditional retailers that could have a flow over effect on our business and our financial results could be negatively impacted. Our consolidated financial results and demand for our products are dependent on the successful development of new products and processes .
Also, if these alternative retail channels, such as e-commerce retailers were to take significant share away from traditional retailers that could have a flow over effect on our business and our financial results could be negatively impacted.
We have indebtedness that is substantial in relation to our shareholders’ equity, and we may incur additional indebtedness in the future, or enter into off-balance sheet financing, which would increase our leverage risks. As of January 1, 2022, we had total debt of approximately $7.0 billion and total Kellogg Company equity of $3.7 billion.
We have indebtedness that is substantial in relation to our shareholders’ equity, and we may incur additional indebtedness in the future, or enter into off-balance sheet financing, which would increase our leverage risks. As of December 30, 2023, we had total debt of approximately $5.9 billion and total Kellanova equity of $3.2 billion.
Any litigation regarding patents or other intellectual property could be costly and time-consuming and could divert the attention of our management and key personnel from our business operations. Third party claims of intellectual property infringement might also require us to enter into costly license agreements.
Any litigation regarding intellectual property rights could be costly and time-consuming and could divert the attention of our management and key personnel from our business operations. Third party claims of intellectual property infringement might also require us to enter into costly license agreements. We also may be subject to significant damages or injunctions against development and sale of certain products.
Also, sustained price increases may lead to declines in volume as competitors may not adjust their prices, or consumers may decide not to pay the higher prices or may forego some purchases altogether during an economic downturn such as the COVID-19 pandemic, which could lead to sales declines and loss of market share.
Also, sustained price increases may lead to declines in volume as competitors may not adjust their prices, or consumers may decide not to pay the higher prices or may increasingly purchase lower-priced offerings or forego some purchases altogether during an economic downturn or a recession or instances of increased inflationary pressures, which could lead to sales declines and loss of market share.
Trends within the food industry change often, and failure to identify and react to changes in these trends could lead to, among other things, reduced loyalty, reduced demand and price reductions for our brands and products .
Trends within the food industry change often, and failure to identify and react to changes in these trends could lead to, among other things, reduced loyalty, reduced demand and price reductions for our brands and products. Additionally, certain weight loss drugs, which may suppress a person’s appetite, may impact demand for our products.
As of January 1, 2022, the carrying value of intangible assets totaled approximately $8.2 billion, of which $5.8 billion was goodwill and $2.4 billion represented trademarks, tradenames, and other acquired intangibles compared to total assets of $18.2 billion and total Kellogg Company equity of $3.7 billion.
As of December 30, 2023, the carrying value of intangible assets totaled approximately $7.0 billion, of which $5.2 billion was goodwill and $1.8 billion represented trademarks, tradenames, and other acquired intangibles compared to total assets of $15.6 billion and total Kellanova equity of $3.2 billion.
Continued disruptions and uncertainties related to the COVID-19 pandemic for a sustained period of time could result in additional delays or modifications to our strategic plans and other initiatives and hinder our ability to achieve our cost savings and productivity initiatives on the same timelines.
Disruptions and uncertainties related to adverse macroeconomic conditions, including rising inflation and economic slowdowns or recessions, for a sustained period of time could result in delays or modifications to our strategic plans and other initiatives and hinder our ability to achieve our cost savings and productivity initiatives on the same timelines.
In addition, the complexity of the execution requires a substantial amount of management and operational resources. These and related demands on our resources may divert the organization's attention from other business issues and have adverse effects on existing business relationships with suppliers and customers.
These and related demands on our resources may divert the organization's attention from other business issues and have adverse effects on existing business relationships with suppliers and customers.
Negative posts or comments about Kellogg, our brands, our products, our labor relations or any of our employees or agents on social or digital media platforms could seriously damage our brands, reputation and brand loyalty, regardless of the information’s accuracy. The harm may be immediate without affording us an opportunity for redress or correction.
Negative posts or comments about Kellanova, our brands, our products, our labor relations or any of our employees or agents on social or digital media platforms could seriously damage our brands, reputation and brand loyalty, regardless of the information’s accuracy.
With respect to acquisitions, we may not be able to identify suitable candidates, consummate a transaction on terms that are favorable to us, or achieve expected returns, expected synergies and other benefits as a result of integration challenges, or may not achieve those objectives on a timely basis.
With respect to acquisitions, we may not be able to identify suitable candidates, consummate a transaction on terms that are favorable to us, integrate the acquired business into our existing operations in a timely and cost-efficient manner, including implementation of enterprise-resource planning systems, or achieve expected returns, expected synergies and other benefits as a result of integration or other challenges, or may not achieve those objectives on a timely basis.
We face competition across our product lines, including snacks, ready-to-eat cereals and other convenience foods, from other companies which have varying abilities to withstand changes in market conditions.
We operate in the highly competitive food industry, including with respect to retail shelf space. We face competition across our product lines, including snacks, ready-to-eat cereals and other convenience foods, from other companies that have varying abilities to withstand changes in market conditions.
We also may be subject to significant damages or injunctions against development and sale of certain products. General Risk Factors We are subject to risks generally associated with companies that operate globally . We are a global company and generated almost half of our net sales for both 2021 and 2020, outside the United States.
General Risk Factors We are subject to risks generally associated with companies that operate globally . We are a global company and generated almost half of our net sales for both 2023 and 2022 outside the United States.
We continue to closely monitor and manage our inventory levels of imported raw materials, packaging and finished goods in the UK We have made investments in resources, systems and processes to meet the new ongoing requirements and we work to mitigate disruptions to our local supply chain and distribution to reduce the impact on our input and distribution costs.
We have made investments in resources, systems and processes to meet the new ongoing requirements and we work to mitigate disruptions to our local supply chain and distribution to reduce the impact on our input and distribution costs.
The slowdown in economic growth or high unemployment in some emerging markets could constrain consumer spending, and declining consumer purchasing power could adversely impact our profitability .
The slowdown in economic growth or high unemployment in some emerging markets could constrain consumer spending, and declining consumer purchasing power could adversely impact our profitability. Dynamics associated with the federal and state debt and budget challenges in the United States could adversely affect us.
If our food products become adulterated, misbranded or mislabeled, we might need to recall those items and may experience product liability if consumers are injured as a result. Selling food products involves a number of legal and other risks, including product contamination, food borne illnesses, spoilage, product tampering, allergens, or other adulteration.
Selling food products involves a number of legal, regulatory and other risks, including product contamination, foreign objects, food-borne illnesses, spoilage, product tampering, allergens, or other adulteration, which could result in product liability claims. We may need to recall some of our products if they become adulterated or misbranded.
Those regulations control such matters as food quality and safety, ingredients, advertising, product or production requirements, labeling, sustainability of packaging (including plastics), import or export of our products or ingredients, relations with distributors and retailers, health and safety, the environment, and restrictions on the use of government programs, such as Supplemental Nutritional Assistance Program, to purchase certain of our products.
Those regulations control such matters as food quality and safety (including the condition and operation of our manufacturing facilities where food is processed), ingredients, advertising and marketing (including, among other limitations, restricting the age of consumers to whom products are marketed and data privacy requirements), product or production requirements, labeling, sustainability of packaging (including plastics), import or export of our products or ingredients, relations with distributors and retailers, health and safety, the environment, and restrictions on the use of government programs, such as Supplemental Nutritional Assistance Program and the Special Supplemental Nutrition Program for Women, Infants and Children, to purchase certain of our products.
Specifically, certain ingredients, packaging and other goods and services have been impacted by the COVID-19 pandemic and inflationary pressures. and although we are unable to predict the impact to our ability to source such materials and services in the future, we expect these supply pressures and market disruptions to continue into 2022.
Specifically, certain ingredients, packaging and other goods and services have been impacted by an unfavorable macroeconomic environment, including as a result of (among other things) labor shortages and inflationary pressures, and although we are unable to predict the impact to our ability to source such materials and services in the future, we expect some supply pressures and market disruptions to continue into 2024.
These disruptions or our failure to effectively respond to them, could increase product or distribution costs, or cause delays or inability to deliver products to our customers. We have experienced temporary disruptions to our supply chain in certain markets.
Illness, travel restrictions or workforce disruptions could negatively affect our supply chain, manufacturing, distribution or other business. These disruptions or our failure to effectively respond to them, could increase product or distribution costs, or cause delays or inability to deliver products to our customers. Disruptions to our supply chain in certain markets have occurred from time to time.
There is significant uncertainty with respect to compliance with such privacy and data protection laws and regulations, including with respect to the European Union General Data Protection Regulation (the “GDPR”) and the California Consumer Privacy Act of 2018 (the “CCPA”), which went into effect on January 1, 2020 (each of which imposes additional obligations on companies regarding the handling of personal data and provides certain individual privacy rights to persons whose data is stored), because they are continuously evolving and developing and may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements.
There continues to be significant uncertainty with respect to compliance with such privacy and data protection laws and regulations, including with respect to the European Union General Data Protection Regulation (the “GDPR”) and the California Consumer Privacy Act of 2018 (the “CCPA”) and the California Privacy Rights Act because these laws are continuously evolving and developing and may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements.
There is an increased focus by foreign, federal, state and local regulatory and legislative bodies regarding environmental policies relating to climate change, regulating greenhouse gas emissions, energy policies and sustainability, including single use plastics. This new or increased focus may result in new or increased laws and regulations that could cause significant increases in our costs of operation and delivery.
There is an increased focus by foreign, federal, state and local regulatory and legislative bodies regarding environmental policies relating to climate change, regulating greenhouse gas emissions, energy policies and sustainability, including single use plastics.
A widespread product recall or market withdrawal could result in significant losses due to their costs, the destruction of product inventory, and lost sales due to the unavailability of product for a period of time. We could also suffer losses from a significant product liability judgment against us.
We may also be liable if the consumption of any of our products causes injury, illness or death. A widespread product recall or market withdrawal could result in significant losses due to their costs, the destruction of product inventory, and lost sales due to the unavailability of product for a period of time.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe generally own our principal properties, including our corporate headquarters, principal research and development center and manufacturing facilities in the United States, and no owned property is subject to any major lien or other encumbrance. Distribution facilities (including related warehousing facilities) and offices of non-plant locations typically are leased.
Biggest changeWe own many of our principal properties, including our principal research and development center and manufacturing facilities in the United States, and no owned property is subject to any major lien or other encumbrance. We lease our corporate headquarters, and our distribution facilities (including related warehousing 27 facilities) and offices of non-plant locations are also typically leased.
At the time of its selection, each location was considered to be favorable, 25 based on the location of markets, sources of raw materials, availability of suitable labor, transportation facilities, location of our other plants producing similar products, and other factors.
At the time of its selection, each location was considered to be favorable, based on the location of markets, sources of raw materials, availability of suitable labor, transportation facilities, location of our other plants producing similar products, and other factors.
Outside the United States, we had, as of February 22, 2022, additional manufacturing locations, some with warehousing facilities, in Australia, Belgium, Brazil, Canada, Colombia, Ecuador, Egypt, Ghana, Great Britain, India, Japan, Malaysia, Mexico, Nigeria, Poland, Russia, South Africa, South Korea, Spain, Thailand, and Turkey.
Outside the United States, we had, as of February 20, 2024, additional manufacturing locations, some with warehousing facilities, in Australia, Belgium, Brazil, Colombia, Ecuador, Egypt, Ghana, Great Britain, India, Japan, Malaysia, Mexico, Nigeria, Poland, South Africa, South Korea, Spain, Thailand, and Turkey.
Our manufacturing facilities in the United States are located in Battle Creek, Michigan; Lancaster, Pennsylvania; Memphis, Tennessee; Omaha, Nebraska; San Jose, California; Rome, Georgia; Kansas City, Kansas; Pikeville, Kentucky; Grand Rapids and Wyoming, Michigan; Blue Anchor, New Jersey; Cary, North Carolina; Cincinnati and Zanesville, Ohio; Muncy, Pennsylvania; and Jackson and Rossville, Tennessee.
Our manufacturing facilities in the United States are located in San Jose, California; Rome, Georgia; Kansas City, Kansas; Pikeville, Kentucky; Grand Rapids and Wyoming, Michigan; Blue Anchor, New Jersey; Cary, North Carolina; Cincinnati and Zanesville, Ohio; Muncy, Pennsylvania; and Jackson and Rossville, Tennessee.
ITEM 2. PROPERTIES Our corporate headquarters and principal research and development facilities are located in Battle Creek, Michigan. We operated, as of February 22, 2022, offices, manufacturing plants and distribution and warehousing facilities totaling more than 37 million square feet of building area in the United States and other countries.
ITEM 2. PROPERTIES Our corporate headquarters are located in Chicago, Illinois and we maintain corporate offices and our principal research and development facilities in Battle Creek, Michigan. We operated, as of February 20, 2024, offices, manufacturing plants and distribution and warehousing facilities totaling more than 36.5 million square feet of building area in the United States and other countries.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn the opinion of management, the ultimate resolution of these matters will not have a material adverse effect on our financial position or results of operations.
Biggest changeIn the opinion of management, the ultimate resolution of these matters is not expected to have a material adverse effect on our financial position or results of operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn February 2020, the Board of Directors approved an authorization to repurchase up to $1.5 billion of our common stock through December 2022. The authorization is intended to allow us to repurchase shares for general corporate purposes and to offset issuances for employee benefit programs.
Biggest changeIn February 2020, the Board of Directors approved an authorization to repurchase up to $1.5 billion of our common stock expiring in December 2022. In December 2022, the Board of Directors approved a new authorization to repurchase up to $1.5 billion of our common stock through December 2025.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The principal market for trading Kellogg shares (Ticker symbol: K) is the New York Stock Exchange (NYSE). At January 1, 2022 there were approximately 26,176 shareholders of record.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The principal market for trading Kellanova shares (Ticker symbol: K) is the New York Stock Exchange (NYSE). At December 30, 2023 there were approximately 23,633 shareholders of record.
(millions, except per share data) Period (a) Total Number of Shares Purchased (b) Average Price Paid Per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs Month #1: 9/26/21-10/23/21 — $ — — $ 1,260 Month #2: 10/24/21-11/20/21 — $ — — $ 1,260 Month #3: 11/21/21-1/1/22 — $ — — $ 1,260 26
(millions, except per share data) Period (a) Total Number of Shares Purchased (b) Average Price Paid Per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs Month #1: 10/01/23-10/28/23 — $ — — $ 1,440 Month #2: 10/29/23-11/25/23 2.1 $ 52.61 2.1 $ 1,330 Month #3: 11/26/23-12/30/23 — $ — — $ 1,330
The following table provides information with respect to purchases of common shares under programs authorized by our Board of Directors during the quarter ended January 1, 2022.
These authorizations were intended to allow us to repurchase shares for general corporate purposes and to offset issuances for employee benefit programs. The following table provides information with respect to purchases of common shares under programs authorized by our Board of Directors during the quarter ended December 30, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCurrency-neutral adjusted operating profit increased $41 million from the prior year after excluding the impact of mark-to-market. 35 2020 compared to 2019 The following tables provide an analysis of net sales and operating profit performance for 2020 versus 2019: Year ended January 2, 2021 (millions) North America Europe Latin America AMEA Corporate Kellogg Consolidated Reported net sales $ 8,361 $ 2,232 $ 914 $ 2,263 $ — $ 13,770 Foreign currency impact on total business (inc)/dec (7) 13 (133) (77) — (204) Currency-neutral net sales $ 8,368 $ 2,219 $ 1,048 $ 2,340 $ — $ 13,974 Impact of 53rd week 134 22 — 18 — 174 Foreign currency impact on 53rd week (inc)/dec — (1) — (1) — (2) Organic net sales $ 8,234 $ 2,198 $ 1,048 $ 2,322 $ — $ 13,802 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 Divestitures 556 — 6 — — 562 Organic net sales $ 7,834 $ 2,092 $ 935 $ 2,156 $ — $ 13,017 % change - 2020 vs. 2019: Reported growth (0.4) % 6.7 % (2.8) % 5.0 % — % 1.4 % Foreign currency impact on total business (inc)/dec (0.1) % 0.7 % (14.2) % (3.5) % — % (1.5) % Currency-neutral growth (0.3) % 6.0 % 11.4 % 8.5 % — % 2.9 % Divestitures (7.1) % — % (0.7) % — % — % (4.5) % Impact of 53rd week 1.7 % 1.0 % — % 0.8 % — % 1.4 % Foreign currency impact on 53rd week (inc)/dec — % (0.1) % — % — % — % — % Organic growth 5.1 % 5.1 % 12.1 % 7.7 % — % 6.0 % Volume (tonnage) 4.8 % 5.3 % 8.9 % 4.2 % — % 5.1 % Pricing/mix 0.3 % (0.2) % 3.2 % 3.5 % — % 0.9 % Note: Tables may not foot due to rounding.
Biggest changeCurrency-neutral adjusted operating profit increased $1 million from the prior year after excluding the impact of mark-to-market and separation costs. 38 Net sales and operating profit 2022 compared to 2021 The following tables provide an analysis of net sales and operating profit performance for 2022 versus 2021: Year ended December 31, 2022 (millions) North America Europe Latin America AMEA Corporate Kellanova Consolidated Reported net sales $ 6,331 $ 2,310 $ 1,089 $ 2,933 $ (9) $ 12,653 Foreign currency impact (12) (245) 7 (228) — (478) Organic net sales $ 6,343 $ 2,555 $ 1,082 $ 3,161 $ (9) $ 13,131 Year ended January 1, 2022 (millions) North America Europe Latin America AMEA Corporate Kellanova Consolidated Reported net sales $ 5,775 $ 2,397 $ 962 $ 2,613 $ — $ 11,747 % change - 2022 vs. 2021: Reported growth 9.6 % (3.6) % 13.2 % 12.2 % — % 7.7 % Foreign currency impact (0.2) % (10.2) % 0.8 % (8.8) % — % (4.0) % Organic growth 9.8 % 6.6 % 12.4 % 21.0 % — % 11.7 % Volume (tonnage) (1.2) % (3.4) % (5.2) % (2.5) % — % (2.5) % Pricing/mix 11.0 % 10.0 % 17.6 % 23.5 % — % 14.2 % Note: Tables may not foot due to rounding.
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.
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.
Segments We manage our operations through four operating segments that are based primarily on geographic location – North America which includes the U.S. businesses and Canada; Europe which consists principally of European countries; Latin America which consists of Central and South America and includes Mexico; and AMEA (Asia Middle East Africa) which consists of Africa, Middle East, Australia and other Asian and Pacific markets.
Segments We manage our operations through four operating segments that are based on geographic location – North America which includes the U.S. businesses and Canada; Europe which consists principally of European countries; Latin America which consists of Central and South America and includes Mexico; and AMEA (Asia Middle East Africa) which consists of Africa, Middle East, Australia and other Asian and Pacific markets.
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.
We use this non-GAAP financial measure of free 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.
Our expense recognition policy for pension and nonpension postretirement benefits is to immediately recognize actuarial gains and losses in our operating results in the year in which they occur. Actuarial gains and losses are recognized annually as of our measurement date, which is our fiscal year-end, or when remeasurement is otherwise required under generally accepted accounting principles.
Our expense recognition policy for pension and nonpension postretirement benefits is to immediately recognize actuarial gains and losses in our results in the year in which they occur. Actuarial gains and losses are recognized annually as of our measurement date, which is our fiscal year-end, or when remeasurement is otherwise required under generally accepted accounting principles.
We measure cash flow as net cash provided by operating activities reduced by expenditures for property additions. We use this non-GAAP financial measure of cash flow to focus management and investors on the amount of cash available over time for debt repayment, dividend distributions, acquisition opportunities, and share repurchases.
We measure free cash flow as net cash provided by operating activities reduced by expenditures for property additions. We use this non-GAAP financial measure of free cash flow to focus management and investors on the amount of cash available over time for debt repayment, dividend distributions, acquisition opportunities, and share repurchases.
Company management and investors use this non-GAAP measure to evaluate changes to the Company's capital structure and credit quality assessment. • Cash flow: Defined as net cash provided by operating activities reduced by expenditures for property additions. Cash flow does not represent the residual cash flow available for discretionary expenditures.
Company management and investors use this non-GAAP measure to evaluate changes to the Company's capital structure and credit quality assessment. • Free cash flow : Defined as net cash provided by operating activities reduced by expenditures for property additions. Free cash flow does not represent the residual cash flow available for discretionary expenditures.
For more information on reconciling items in the table above, please refer to the Significant items impacting comparability section. (a) Reported gross margin as a percentage of net sales. Gross margin is equal to net sales less cost of goods sold.
For information on the reconciling items in the table above, please refer to the Significant items impacting comparability section. (a) Reported gross margin as a percentage of net sales. Gross margin is equal to net sales less cost of goods sold.
Although we review our expected long-term rates of return annually, our benefit trust investment performance for one particular year does not, by itself, significantly influence our evaluation.
Although we review our expected long-term rates of return annually, our benefit trust investment performance for one particular year does not, by itself, significantly influence 50 our evaluation.
A change in our credit ratings could limit our access to the U.S. short-term debt market and/or increase the cost of refinancing long-term debt in the future. However, even under these circumstances, we would continue to have access to our 364-Day Credit Facility, which expires in December 2022, as well as our Five-Year Credit Agreement, which expires in December 2026.
A change in our credit ratings could limit our access to the U.S. short-term debt market and/or increase the cost of refinancing long-term debt in the future. However, even under these circumstances, we would continue to have access to our 364-Day Credit Facility, which expires in December 2024, as well as our Five-Year Credit Agreement, which expires in December 2026.
Actual 2022 contributions could be different from our current projections, as influenced by our decision to undertake discretionary funding of our benefit trusts versus other competing investment priorities, future changes in government requirements, trust asset performance, renewals of union contracts, or higher-than-expected health care claims cost experience.
Actual 2024 contributions could be different from our current projections, as influenced by our decision to undertake discretionary funding of our benefit trusts versus other competing investment priorities, future changes in government requirements, trust asset performance, renewals of union contracts, or higher-than-expected health care claims cost experience.
These foods include snacks, such as crackers, savory snacks, toaster pastries, cereal bars and bites; and convenience foods, such as, ready-to-eat cereals, frozen waffles, veggie foods and noodles. Kellogg products are manufactured and marketed globally. Our MD&A references consumption and net sales in discussing our sales trends for certain categories and brands.
These foods include snacks, such as crackers, savory snacks, toaster pastries, cereal bars and bites; and convenience foods, such as ready-to-eat cereals, frozen waffles, veggie foods and noodles. Kellanova products are manufactured and marketed globally. Our MD&A references consumption and net sales in discussing our sales trends for certain categories and brands.
Management uses this non-GAAP measure to monitor the effectiveness of initiatives in place to optimize our global tax rate. 29 • Net debt : Defined as the sum of long-term debt, current maturities of long-term debt and notes payable, less cash and cash equivalents and marketable securities.
Management uses this non-GAAP measure to monitor the effectiveness of initiatives in place to optimize our global tax rate. 31 • Net debt : Defined as the sum of long-term debt, current maturities of long-term debt and notes payable, less cash and cash equivalents, and marketable securities.
These items for 2022 include impacts of mark-to-market adjustments for pension plans (service cost, interest cost, expected return on plan assets, and other net periodic pension costs are not excluded), commodity contracts, certain equity investments and certain foreign currency contracts.
These items for 2024 include impacts of mark-to-market adjustments for pension plans (service cost, interest cost, expected return on plan assets, and other net periodic pension costs are not excluded), commodity contracts, certain equity investments, and certain foreign currency contracts.
Current DSO levels within North America are consistent with DSO levels prior to the execution of the Extended Term Program and Monetization Programs. Refer to Note 2 within Notes to Consolidated Financial Statements for further information related to the sale of accounts receivable.
Current DSO levels within North America are consistent with DSO levels prior to the execution of the Extended Term Program and Monetization Programs. Refer to Note 3 within Notes to Consolidated Financial Statements for further information related to the sale of accounts receivable.
Significant adjustments to our liability for unrecognized tax benefits impacting our effective tax rate are separately presented in the rate reconciliation table of Note 13 within Notes to Consolidated Financial Statements.
Significant adjustments to our liability for unrecognized tax benefits impacting our effective tax rate are separately presented in the rate reconciliation table of Note 14 within Notes to Consolidated Financial Statements.
The Monetization Programs provide for the continuing sale of certain receivables on a revolving basis until terminated by either party; however the maximum funding from receivables that may be sold at any time is currently $1.1 billion, but may be increased or decreased as customers move in or out of the Extended Terms Program and as additional financial institutions move in or out of the Monetization Programs.
The Monetization Programs provide for the continuing sale of certain 47 receivables on a revolving basis until terminated by either party; however the maximum funding from receivables that may be sold at any time is currently $975 million, but may be increased or decreased as customers move in or out of the Extended Terms Program and as additional financial institutions move in or out of the Monetization Programs.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Kellogg Company and Subsidiaries RESULTS OF OPERATIONS Business overview The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand Kellogg Company, our operations and our present business environment.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Kellanova and Subsidiaries RESULTS OF OPERATIONS Business overview The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand Kellanova, our operations and our present business environment.
We believe that we will not be required to make any contributions under PPA requirements until 2022 or beyond.
We believe that we will not be required to make any contributions under PPA requirements until 2024 or beyond.
We expect cash provided by operating activities of $1.7-$1.8 billion and capital expenditures of approximately $600 million in 2022. We currently have $2.5 billion of unused revolving credit agreements, including $1.5 billion effective through 2026 and $1.0 billion effective through December 2022, as well as continued access to the commercial paper markets.
We expect cash provided by operating activities of $1.7 billion and capital expenditures of approximately $700 million in 2024. We currently have $2.5 billion of unused revolving credit agreements, including $1.5 billion effective through 2026 and $1.0 billion effective through December 2024, as well as continued access to the commercial paper markets.
Monetization and Accounts Payable programs We have a program in which customers could extend their payment terms in exchange for the elimination of early payment discounts (Extended Terms Program).
Monetization and Accounts Payable Tracking Systems We have a program in which customers could extend their payment terms in exchange for the elimination of early payment discounts (Extended Terms Program).
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.
These non-GAAP financial measures may not be comparable to similar measures used by other companies. 30 • Currency-neutral net sales and organic net sales : We adjust the GAAP financial measure to exclude the impact of foreign currency, resulting in currency-neutral net sales. In addition, we exclude the impact of acquisitions, divestitures, and foreign currency, resulting in organic net sales.
The Company was in compliance with all financial covenants contained in these agreements at January 1, 2022. Our Notes contain customary covenants that limit the ability of the Company and its restricted subsidiaries (as defined) to incur certain liens or enter into certain sale and lease-back transactions and also contain a change of control provision.
The Company was in compliance with all financial covenants contained in these agreements at December 30, 2023. Our Notes contain customary covenants that limit the ability of the Company and its restricted subsidiaries (as defined) to incur certain liens or enter into certain sale and lease-back transactions and also contain a change of control provision.
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), commodity contracts, certain equity investments and certain foreign currency contracts, multi-employer pension plan withdrawal liabilities, gain/loss on divestiture, other costs impacting comparability, and foreign currency, resulting in currency-neutral adjusted.
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, operating margin, and diluted EPS : We adjust the GAAP financial measures to exclude the effect of restructuring programs, costs of the separation transaction, mark-to-market adjustments for pension plans (service cost, interest cost, expected return on plan assets, and other net periodic pension costs are not excluded), commodity contracts, certain equity investments and certain foreign currency contracts, a gain on interest rate swaps, other costs impacting comparability, and foreign currency, resulting in currency-neutral adjusted.
These non-GAAP measures are also used to make decisions regarding the future direction of our business, and for resource allocation decisions. • Adjusted: gross profit, gross margin, operating profit and diluted EPS: We adjust the GAAP financial measures to exclude the effect of restructuring programs, mark-to-market adjustments for pension plans (service cost, interest cost, expected return on plan assets, and other net periodic pension costs are not excluded), commodity contracts, certain equity investments and certain foreign currency contracts, multi-employer pension plan withdrawal liabilities, gain/loss on the divestiture, and other costs impacting comparability resulting in adjusted.
These non-GAAP measures are also used to make decisions regarding the future direction of our business, and for resource allocation decisions. • Adjusted: gross profit, gross margin, operating profit, operating margin, and diluted EPS : We adjust the GAAP financial measures to exclude the effect of restructuring programs, costs of the separation transaction , mark-to-market adjustments for pension plans (service cost, interest cost, expected return on plan assets, and other net periodic pension costs are not excluded), commodity contracts, certain equity investments and certain foreign currency contracts, a gain on interest rate swaps, and other costs impacting comparability resulting in adjusted.
Annually during the fourth quarter, in conjunction with our annual budgeting process, we may perform qualitative testing, or depending on factors such as prior-year test results, current year developments, current risk evaluations and other practical considerations, we may instead perform a quantitative impairment test.
Annually during the fourth quarter, in conjunction with our annual budgeting process, we may perform qualitative testing, or depending on factors such as prior-year test results, current year developments, current risk evaluations and other practical considerations, we may instead perform a quantitative impairment test. In our quantitative testing, we compare a reporting unit’s estimated fair value with its carrying value.
There are no significant restrictions on the payment of dividends. We were in compliance with all covenants as of January 1, 2022. The Notes do not contain acceleration of maturity clauses that are dependent on credit ratings.
There are no significant restrictions on the payment of dividends. We were in compliance with all covenants as of December 30, 2023. The Notes do not contain acceleration of maturity clauses that are dependent on credit ratings.
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.
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.
We currently project that we will make total U.S. and foreign benefit plan contributions in 2022 of approximately $20 million.
We currently project that we will make total U.S. and foreign benefit plan contributions in 2024 of approximately $64 million.
These factors, coupled with the use of our ongoing cash flows from operations to service our debt obligations, pay dividends, fund acquisition opportunities, and repurchase our common stock, reduce our working capital amounts. We had negative working capital of $1.9 billion and $1.8 billion as of January 1, 2022 and January 2, 2021, respectively.
These factors, coupled with the use of our ongoing cash flows from operations to service our debt obligations, pay dividends, fund acquisition opportunities, and repurchase our common stock, reduce our working capital amounts. We had negative working capital of $1.7 billion and $2.2 billion as of December 30, 2023 and December 31, 2022, respectively.
Based on consolidated obligations at January 1, 2022, a 25 basis point decline in the yield curve used for benefit plan measurement purposes would decrease 2022 benefits expense by approximately $8 million and would result in an immediate loss recognition of $207 million. All obligation-related actuarial gains and losses are recognized immediately in the year in which they occur.
Based on consolidated obligations at December 30, 2023, a 25 basis point decline in the yield curve used for benefit plan measurement purposes would decrease 2024 benefits expense by approximately $2 million and would result in an immediate loss recognition of $174 million. All obligation-related actuarial gains and losses are recognized immediately in the year in which they occur.
Despite the previously-described policies for selecting major actuarial assumptions, we periodically experience material actuarial gains or losses due to differences between assumed and actual experience and due to changing economic conditions. During 2021, we recognized a net actuarial gain of approximately $164 million compared to a net actuarial loss of approximately $151 million in 2020.
Despite the previously-described policies for selecting major actuarial assumptions, we periodically experience material actuarial gains or losses due to differences between assumed and actual experience and due to changing economic conditions. During 2023, we recognized a net actuarial loss of approximately $142 million compared to a net actuarial loss of approximately $228 million in 2022.
Reconciliation of Non-GAAP amounts - Cash Flow Guidance (billions) Full Year 2022 Net cash provided by (used in) operating activities $1.7 - $1.8 Additions to properties ~ ($0.6) Cash Flow $1.1 - $1.2
Reconciliation of Non-GAAP amounts - Free Cash Flow Guidance (billions) Full Year 2024 Net cash provided by (used in) operating activities ~ $1.7 Additions to properties ~ ($0.7) Free Cash Flow ~ $1.0
Reaching a determination on useful life requires significant judgments and assumptions regarding the future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, known technological advances, legislative action that results in an uncertain or changing regulatory environment, and expected changes in distribution channels), the level of required maintenance expenditures, and the expected lives of other related groups of assets.
Reaching a determination on useful life requires significant judgments and assumptions regarding the future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, known technological advances, legislative action that results in an uncertain or changing regulatory environment, and expected changes in distribution channels), the level of required maintenance expenditures, and the expected lives of other related groups of assets. 49 At December 30, 2023, goodwill and other intangible assets amounted to $7.0 billion, consisting primarily of goodwill and brands.
In 2021, the SOA released an updated improvement scale that incorporates an additional year of data. In determining the appropriate mortality assumptions as of 2021 fiscal year-end, we used the 2019 SOA tables with collar adjustments based on Kellogg’s current population, consistent with the prior year.
In 2021, the SOA released an improvement scale that incorporated an additional year of data. In 2022 and 2023, the SOA did not release an updated improvement scale. In determining the appropriate mortality assumptions as of 2023 fiscal year-end, we used the 2019 SOA tables with collar adjustments based on Kellanova’s current population, consistent with the prior year.
Assumed mortality rates of plan participants are a critical estimate in measuring the expected payments a participant will receive over their lifetime and the amount of expense we recognize. In 2019, the Society of Actuaries (SOA) published updated mortality tables and an updated improvement scale.
The experience gain arising from recognition of 2023 claims experience was approximately $4 million. Assumed mortality rates of plan participants are a critical estimate in measuring the expected payments a participant will receive over their lifetime and the amount of expense we recognize. In 2019, the Society of Actuaries (SOA) published updated mortality tables and an updated improvement scale.
A summary of our operating and finance lease obligations as of January 1, 2022 can be found in Note 7 “Leases and Other Commitments”, to the Consolidated Financial Statements contained in this report.
A summary of our operating and finance lease obligations as of December 30, 2023 can be found in Note 8 “Leases and Other Commitments”, to the Consolidated Financial Statements contained in this report.
Management uses these non-GAAP financial measures to evaluate the effectiveness of initiatives intended to improve profitability, as well as to evaluate the impacts of inflationary pressures and decisions to invest in new initiatives within each of our segments. • Adjusted effective income tax rate: We adjust the GAAP financial measures to exclude the effect of restructuring programs, mark-to-market adjustments for pension plans (service cost, interest cost, expected return on plan assets, and other net periodic pension costs are not excluded), commodity contracts, certain equity investments and certain foreign currency contracts, multi-employer pension plan withdrawal liabilities, the gain/loss on divestiture, and other costs impacting comparability.
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): 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) and certain equity investments, losses resulting from divestitures, and other costs impacting comparability.
Currency-neutral adjusted diluted EPS of $4.04 for the year increased 1.3% compared to prior year EPS of $3.99, after excluding the impact of significant items impacting comparability.
Currency-neutral adjusted diluted EPS of $3.18 for the year increased 7.4% compared to prior year EPS of $2.96, after excluding the impact of significant items impacting comparability.
The Notes contain customary covenants that limit the ability of the Company and its restricted subsidiaries (as defined) to incur certain liens or enter into certain sale and lease-back transactions, as well as a change of control provision. Additionally, we repaid the €500 million, seven-year 1.75% Euro Notes due 2021, upon maturity.
The Notes contain customary covenants that limit the ability of the Company and its restricted subsidiaries (as defined) to incur certain liens or enter into certain sale and lease-back transactions, as well as a change of control provision. In November 2022, we repaid €600 million, five-year 0.80% Euro Notes due 2022, upon maturity.
We excluded the items which we believe may obscure trends in our pre-tax income and the related tax effect of those items on our adjusted effective income tax rate, and other impacts to tax expense, including tax reform in the UK and U.S. and certain foreign valuation allowances.
We excluded the items which we believe may obscure trends in our pre-tax income and the related tax effect of those items on our adjusted effective income tax rate, and other impacts to tax expense.
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. 51 See the table below that outlines the projected impact of certain other items that are excluded from non-GAAP guidance for 2022: Impact of certain items excluded from Non-GAAP guidance: Net Sales Operating Profit Earnings Per Share Business and portfolio realignment (pre-tax) $30-$40M $0.09-$0.12 Income tax impact applicable to adjustments, net** ~$0.03 Currency-neutral adjusted guidance* 1-2% 1-2% Organic guidance* ~ 3% * 2022 full year guidance for net sales, operating profit, and earnings per share are provided on a non-GAAP basis only because certain information necessary to calculate such measures on a GAAP basis is unavailable, dependent on future events outside of our control and cannot be predicted without unreasonable efforts by the Company.
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. 52 See the table below that outlines the projected impact of certain other items that are excluded from non-GAAP guidance for 2024: 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 Network optimization (pre-tax) $150-$160M $0.43 - $0.46 Income tax impact applicable to adjustments, net** $0.13 - $0.14 Adjusted guidance $1,850-$1,900M $3.55 - $3.65 Organic guidance * ~ 3% * 2024 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.
Our U.S. plan model, corresponding to approximately 69% of our trust assets globally, currently incorporates a long-term inflation assumption of 2.5% and a 2021 weighted-average active management premium of 0.75% (net of fees) validated by historical analysis and future return expectations.
Our U.S. plan model, corresponding to approximately 56% of our trust assets globally, currently incorporates a long-term inflation assumption of 2.5% and a 2023 weighted-average active management premium of 0.84% for the pension plans and 0.93% for the retiree medical plan, (net of fees) validated by historical analysis and future return expectations.
Reconciliation of non-GAAP guidance 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).
As a result, free cash flow is expected to be approximately $1.0 billion. Reconciliation of non-GAAP guidance 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).
Business and portfolio realignment One-time costs related to reorganizations in support of our Deploy for Growth priorities and a reshaped portfolio; investments in enhancing capabilities prioritized by our Deploy for Growth strategy; and completed and prospective divestitures and acquisitions, including the divestiture of our cookies, fruit snacks, pie crusts, and ice cream cone business.
Business and portfolio realignment One-time costs related to reorganizations in support of our Deploy for Growth priorities and a reshaped portfolio; investments in enhancing capabilities prioritized by our Deploy for Growth strategy; and completed and prospective divestitures and acquisitions.
This amount was mostly non-discretionary. Additionally, we contributed $16 million to our retiree medical programs. 50 Income taxes Our consolidated effective income tax rate is influenced by tax planning opportunities available to us in the various jurisdictions in which we operate.
During 2023, we made contributions in the amount of $25 million to Kellanova’s global tax-qualified pension programs. This amount was mostly non-discretionary. Additionally, we contributed $10 million to our retiree medical programs. Income taxes Our consolidated effective income tax rate is influenced by tax planning opportunities available to us in the various jurisdictions in which we operate.
(a) Gross profit is equal to net sales less cost of goods sold. 2020 versus 2019 gross margin performance was as follows: Change vs. prior year (pts.) 2020 2019 Reported gross margin (a) 34.3 % 32.3 % 2.0 Mark-to-market (0.1) % — % (0.1) Project K — % (0.3) % 0.3 Brexit readiness impacts — % — % — Business and portfolio realignment — % (0.1) % 0.1 Multi-employer pension plan withdrawal — % (1.0) % 1.0 Adjusted gross margin 34.4 % 33.7 % 0.7 Foreign currency impact 0.1 % — % 0.1 Currency-neutral adjusted gross margin 34.3 % 33.7 % 0.6 Note: Tables may not foot due to rounding.
(a) Gross profit is equal to net sales less cost of goods sold. 2022 versus 2021 gross margin performance was as follows: Change vs. prior year (pts.) 2022 2021 Reported gross margin (a) 30.1 % 32.5 % (2.4) Mark-to-market (1.1) % (0.1) % (1.0) Business and portfolio realignment (0.1) % (0.1) % — Adjusted gross margin 31.3 % 32.7 % (1.4) Foreign currency impact 0.1 % — % 0.1 Currency-neutral adjusted gross margin 31.2 % 32.7 % (1.5) Note: Tables may not foot due to rounding.
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.
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.
Margin performance 2021 versus 2020 gross margin performance was as follows: Change vs. prior year (pts.) 2021 2020 Reported gross margin (a) 32.2 % 34.3 % (2.1) Mark-to-market (0.1) % (0.1) % — Business and portfolio realignment (0.2) % — % (0.2) Multi-employer pension plan withdrawal — % — % — Adjusted gross margin 32.5 % 34.4 % (1.9) Foreign currency impact 0.2 % — % 0.2 Currency-neutral adjusted gross margin 32.3 % 34.4 % (2.1) Note: Tables may not foot due to rounding.
Margin performance 2023 versus 2022 gross margin performance was as follows: Change vs. prior year (pts.) 2023 2022 Reported gross margin (a) 32.6 % 30.1 % 2.5 Mark-to-market (0.1) % (1.1) % 1.0 Separation costs — % — % — Business and portfolio realignment — % (0.1) % 0.1 Adjusted gross margin 32.7 % 31.3 % 1.4 Foreign currency impact 0.8 % — % 0.8 Currency-neutral adjusted gross margin 31.9 % 31.3 % 0.6 Note: Tables may not foot due to rounding.
This could have significant impact on our results if such increase or decrease in the value of the U.S. dollar is substantial. Interest expense Interest expense was $223 million and $281 million for the years ended January 1, 2022 and January 2, 2021, respectively.
This could have significant impact on our results if such increase or decrease in the value of the U.S. dollar is substantial. 43 Interest expense and interest income Interest expense was $303 million and $201 million for the years ended December 30, 2023 and December 31, 2022, respectively.
A summary of principal payments for long-term debt as of January 1, 2022 can be found in Note 8 “Debt”, to the Consolidated Financial Statements contained in this report. Interest payments will be approximately $200 million per year from 2022 through 2026 and approximately $900 million in total from 2027 through the last debt maturity date.
A summary of principal payments for long-term debt as of December 30, 2023 can be found in Note 9 “Debt”, to the Consolidated Financial Statements contained in this report. Interest payments will be approximately $142 million per year from 2024 through 2028 and approximately $646 million in total from 2029 through the last debt maturity date.
Fluctuations in foreign currency exchange rates could impact the expected effective income tax rate as it is dependent upon U.S. dollar earnings of foreign subsidiaries doing business in various countries with differing statutory rates.
For more information on reconciling items in the table above, please refer to the Significant items impacting comparability section. Fluctuations in foreign currency exchange rates could impact the expected effective income tax rate as it is dependent upon U.S. dollar earnings of foreign subsidiaries doing business in various countries with differing statutory rates.
These estimates are made using various techniques including historical data on performance of similar promotional programs. Differences between estimated expense and actual redemptions are normally immaterial and recognized as a change in management estimate in a subsequent period. On a full-year basis, these subsequent period adjustments represent approximately 1% of our company’s net sales.
Differences between estimated expense and actual redemptions are normally immaterial and recognized as a change in management estimate in a subsequent period. On a full-year basis, these subsequent period adjustments represent less than 1% of our company’s net sales.
For the years ended January 1, 2022 and January 2, 2021, our actual return on plan assets exceeded (was less than) the recognized assumed return by $(33) million and $400 million, respectively. 49 Pension assets include a level 3 investment comprising 5% of total plan assets as of January 1, 2022.
For the years ended December 30, 2023 and December 31, 2022, our actual return on plan assets was more than the recognized assumed return by $52 million and less than the recognized by $1.5 billion, respectively. Pension assets include a level 3 investment comprising 32% of total plan assets as of December 30, 2023.
The following table sets forth a summary of our cash flows: (dollars in millions) 2021 2020 Net cash provided by (used in): Operating activities $ 1,701 $ 1,986 Investing activities (528) (585) Financing activities (1,306) (1,388) Effect of exchange rates on cash and cash equivalents (16) 25 Net increase (decrease) in cash and cash equivalents $ (149) $ 38 Operating activities The principal source of our operating cash flows is net earnings, primarily cash receipts from the sale of our products, net of costs to manufacture and market our products.
The following table sets forth a summary of our cash flows: (dollars in millions) 2023 2022 Net cash provided by (used in): Operating activities $ 1,645 $ 1,651 Investing activities (562) (448) Financing activities (1,110) (1,081) Effect of exchange rates on cash and cash equivalents 2 (109) Net increase (decrease) in cash and cash equivalents $ (25) $ 13 Operating activities The principal source of our operating cash flows is net earnings, primarily cash receipts from the sale of our products, net of costs to manufacture and market our products.
Supplier payment term modifications did not have a material impact on our cash flows during 2021, and are not expected to have a material impact in 2022. 43 We have a substantial amount of indebtedness which results in current maturities of long-term debt and notes payable which can have a significant impact on working capital as a result of the timing of these required payments.
We have a substantial amount of indebtedness which results in current maturities of long-term debt and notes payable which can have a significant impact on working capital as a result of the timing of these required payments.
Currency-neutral adjusted gross margin decreased 210 basis points compared to 2020. 39 Our 2021 and 2020 currency-neutral adjusted gross profit is reconciled to the most comparable U.S.
Currency-neutral adjusted gross margin increased 60 basis points compared to 2022. 42 Our 2023 and 2022 currency-neutral adjusted gross profit is reconciled to the most comparable U.S.
All historic non-GAAP financial measures have been reconciled with the most directly comparable GAAP financial measures. 28 Non-GAAP Financial Measures Non-GAAP financial measures used for evaluation of performance include currency-neutral and organic net sales, adjusted and currency-neutral adjusted operating profit, adjusted and currency-neutral adjusted diluted earnings per share (EPS), adjusted and currency-neutral adjusted gross profit, adjusted and currency neutral adjusted gross margin, adjusted other income (expense), and cash flow.
Non-GAAP Financial Measures Non-GAAP financial measures used for evaluation of performance include currency-neutral and organic net sales, adjusted and currency-neutral adjusted operating profit, adjusted and currency-neutral adjusted diluted earnings per share (EPS), adjusted and currency-neutral adjusted gross profit, adjusted and currency neutral adjusted gross margin, net debt and cash flow.
Certain of our assets, liabilities, expenses and revenues are denominated in currencies other than the U.S. dollar, primarily in the euro, British pound, Mexican peso, Australian dollar, Canadian dollar, Brazilian Real, Nigerian Naira, and Russian ruble. To prepare our consolidated financial statements, we must translate those assets, liabilities, expenses and revenues into U.S. dollars at the applicable exchange rates.
Certain of our assets, liabilities, expenses and revenues are denominated in currencies other than the U.S. dollar, primarily in the euro, British pound, Mexican peso, Australian dollar, Canadian dollar, Brazilian Real, Nigerian Naira, Russian ruble, Polish zloty, and Egyptian pound.
Valuation allowances were recorded to reduce deferred tax assets to an amount that will, more likely than not, be realized in the future. FUTURE OUTLOOK The Company issued its initial financial guidance for 2022.
Valuation allowances were recorded to reduce deferred tax assets to an amount that will, more likely than not, be realized in the future. FUTURE OUTLOOK The Company affirmed the financial guidance for 2024 that it had first provided in August, 2023, at its Day@K investor event.
A summary of our pension and postretirement benefit obligations as of January 1, 2022 can be found in Notes 10 “Pension Benefits” and Note 11 “Nonpension Postretirement and Postemployment Benefits”, to the Consolidated Financial Statements contained in this report. See Note 13 “Income Taxes”, to the Consolidated Financial Statements contained in this report for discussion of uncertain tax positions.
A summary of our pension and postretirement benefit obligations as of December 30, 2023 can be found in Notes 11 “Pension Benefits” and Note 12 “Nonpension Postretirement and Postemployment Benefits”, to the Consolidated Financial Statements contained in this report.
Based on consolidated benefit plan assets at January 1, 2022, a 100 basis point increase or decrease in the assumed rate of return would correspondingly decrease or increase 2022 benefits expense by approximately $61 million.
Foreign trust investments represent approximately 44% of our global benefit plan assets. Based on consolidated benefit plan assets at December 30, 2023, a 100 basis point increase or decrease in the assumed rate of return would correspondingly decrease or increase 2024 benefits expense by approximately $23 million.
The spot rates used in this process are derived from a yield curve created from yields on the 40th to 90th percentile of U.S. high quality bonds. A similar methodology is applied in Canada and Europe, and in the United Kingdom the underlying yield curve was derived after further adjustments to the universe of bonds to remove government backed bonds.
The spot rates used in this process are derived from a yield curve created from yields on the 40th to 90th percentile of U.S. high quality bonds. A similar methodology is applied in Canada and Europe. The projected benefit obligation for the plan in the United Kingdom is set equal to the fair value of the buy-in annuity contracts.
In addition, based on mortality information available from the Social Security Administration and other sources, we developed assumptions for future mortality improvement in line with our expectations for future experience. The change to the mortality assumption increased the year-end pension and postretirement benefit obligations by $15 million and $5 million, respectively.
In addition, our assumption for future mortality improvement continues to be based on mortality information available from the Social Security Administration and other sources, consistent with the prior year and in line with our expectations for future experience. There were no changes to the year-end pension and postretirement benefit obligations due to mortality assumption changes.
Capital spending in 2021 included investments in our supply chain infrastructure, including manufacturing capacity expansions in multiple markets and categories and initiatives targeting waste reductions and productivity improvements. Cash paid for additions to properties as a percentage of net sales was 3.9% and 3.7% in 2021 and 2020, respectively.
Capital spending in 2023 included investments in our supply chain infrastructure, including manufacturing capacity expansions in multiple markets as well as investments in conjunction with the separation transaction. Cash paid for additions to properties as a percentage of net sales was 5.1% and 3.9% in 2023 and 2022, respectively.
Additionally, working capital could be negatively impacted if we shorten our supplier payment terms as a result of supplier negotiations. For suppliers participating in the Accounts Payable Programs, financial institutions may terminate their participation or we could experience a downgrade in our credit rating that could result in higher costs to suppliers.
For suppliers participating in the Accounts Payable Tracking Systems, financial institutions may terminate their participation or we could experience a downgrade in our credit rating that could result in higher costs to suppliers.
In our quantitative testing, we compare a reporting unit’s estimated fair value with its carrying value with a reporting unit’s fair value being estimated using market multiples. This approach employs market multiples based on either sales or earnings before interest, taxes, depreciation and amortization for companies that are comparable to our reporting units.
The reporting unit’s fair value is estimated using a combination of a market multiples and discounted cash flow methodologies. The market multiples approach is based on either sales or earnings before interest, taxes, depreciation and amortization for companies that are comparable to our reporting units.
Latin America Reported net sales increased 9.0% driven by both volume and price/mix, and with broad-based growth across the region, led by snacks, and favorable foreign currency translation. Organic net sales increased 7.4%, after excluding the impact of foreign currency.
Latin America Reported net sales increased 16.3% driven by strong price/mix growth and favorable foreign currency translation, with growth in snacks and cereal. Organic net sales increased 8.4%, after excluding the impact of foreign currency.
On February 18, 2022, the Board of Directors declared a dividend of $.58 per common share, payable on March 15, 2022 to shareholders of record at the close of business on March 1, 2022.
We paid quarterly dividends to shareholders totaling $2.34 per share in 2023 versus $2.34 per share in 2022. On February 16, 2024, the Board of Directors declared a dividend of $.56 per common share, payable on March 15, 2024 to shareholders of record at the close of business on March 1, 2024.
The proceeds from these notes were used for general corporate purposes, including the payment of offering related fees and expenses, repayment of a portion of the $600 million 4.00% Notes due 2020 upon maturity, and repayment of a portion of commercial paper borrowings.
The proceeds from these notes were used for general corporate purposes, including the payment of offering related fees and expenses, repayment of the $210 million 2.75% Notes when they matured on March 1, 2023, and repayment of a portion of commercial paper borrowings.
Organic net sales exclude the impact of acquisitions, including the foreign currency impact calculated by applying the prior year foreign currency rates to current period results. 31 Financial results For the full year ended January 1, 2022, our reported net sales increased 3.0% versus the prior year on positive price/mix across all regions and accelerated growth in snacks and emerging markets.
Organic net sales exclude the impact of acquisitions, including the foreign currency impact calculated by applying the prior year foreign currency rates to current period results. 33 Financial results For the full year ended December 30, 2023, our reported net sales increased 3.7% versus the prior year on positive price/mix across all regions which more than offset the impacts of price elasticity on volume and adverse foreign currency translation.
Additionally, d uring the third quarter, the Company determined that certain foreign deferred tax assets were no longer more likely than not to be realized in the future and a full valuation allowance totaling $20 million was recorded on a discrete period basis.
Valuation allowance During the fourth quarter of 2023, the Company recorded a valuation allowance on deferred tax assets of $21 million in conjunction with the separation of our North America cereal business. 32 Foreign valuation allowance During the third quarter of 2021, the Company determined that certain foreign deferred tax assets were no longer more likely than not to be realized in the future and a full valuation allowance of $20 million was recorded.
We have agreements with third parties (Accounts Payable Program) to provide accounts payable tracking systems which facilitate participating suppliers’ ability to monitor and, if elected, sell our payment obligations to designated third-party financial institutions.
We have agreements with third parties to provide accounts payable tracking systems which facilitate participating suppliers’ ability to monitor and, if elected at their discretion, make offers to sell one or more of our payment obligations prior to their scheduled due dates at a discounted price to participating financial institutions.
Adjusted effective tax rates for 2021 and 2020 and were 21.9% and 22.2%, respectively. 42 The following table provides a reconciliation of reported to adjusted income taxes and effective income tax rate for 2021 and 2020.
The following table provides a reconciliation of reported to adjusted income taxes and effective income tax rate for 2023 and 2022.
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.
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.
If the carrying value of a reporting unit exceeds its fair value, we consider the reporting unit impaired and reduce its carrying value of goodwill such that the reporting unit’s new carrying value is the estimated fair value.
These estimates are made using various inputs including historical data, current and anticipated market conditions, management plans, and market comparables. If the carrying value of a reporting unit exceeds its fair value, we consider the reporting unit impaired and reduce its carrying value of goodwill such that the reporting unit’s new carrying value is the estimated fair value.
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.
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. The adjusted-basis dollar range guidance shown below incorporates an impact from foreign currency based solely on prevailing exchange rates as of December 30, 2023.
MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying notes thereto contained in Item 8 of this Report, as well as Part II, 'Item 7.
MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying notes thereto contained in Item 8 of this Report. For more than 115 years, consumers have counted on Kellanova for great-tasting, high-quality and nutritious foods.
Refer to Note 1 within Notes to Consolidated Financial Statements for further information related to accounts payable. If financial institutions were to terminate their participation in the Monetization Programs and we are not able to modify related customer payment terms, working capital could be negatively impacted.
If financial institutions were to terminate their participation in the Monetization Programs and we are not able to modify related customer payment terms, working capital could be negatively impacted. Additionally, working capital could be negatively impacted if we shorten our supplier payment terms as a result of supplier negotiations.
Our assumed rate of return for U.S. plans in 2021 was 6.25%, equated to approximately the 65th percentile expectation of our model, respectively. Similar methods are used for various foreign plans with invested assets, reflecting local economic conditions. Foreign trust investments represent approximately 31% of our global benefit plan assets.
Our assumed rate of return for U.S. plans in 2023 was 7.75% for the pension plans and 8.00% for the retiree medical plan, which equated to approximately the 55th and 53rd percentile expectations of our model, respectively. Similar methods are used for various foreign plans with invested assets, reflecting local economic conditions.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

15 edited+10 added−3 removed3 unchanged
Biggest changeWe assess foreign currency risk based on transactional cash flows and translational volatility and may enter into forward contracts, options, and currency swaps to reduce fluctuations in long or short currency positions. Forward contracts and options are generally less than 18 months duration. Currency swap agreements may be established in conjunction with the term of underlying debt issuances.
Biggest changeThe aggregate effect of these adjustments for the year resulted in translation losses of approximately $141 million, which have been recognized in other comprehensive income. We assess foreign currency risk based on transactional cash flows and translational volatility and may enter into forward contracts, options, and currency swaps to reduce fluctuations in long or short currency positions.
These unfavorable changes would generally have been offset by favorable changes in the values of the underlying exposures. 52 Interest rate risk Our company is exposed to interest rate volatility with regard to future issuances of fixed rate debt and existing and future issuances of variable rate debt. Primary exposures include movements in U.S.
These unfavorable changes would generally have been offset by favorable changes in the values of the underlying exposures. Interest rate risk Our company is exposed to interest rate volatility with regard to future issuances of fixed rate debt and existing and future issuances of variable rate debt. Primary exposures include movements in U.S.
Refer to Note 14 within Notes to Consolidated Financial Statements for further information on our derivative financial and commodity instruments. Foreign exchange risk Our company is exposed to fluctuations in foreign currency cash flows related primarily to third-party purchases, intercompany transactions, and when applicable, nonfunctional currency denominated third-party debt.
Refer to Note 15 within Notes to Consolidated Financial Statements for further information on our derivative financial and commodity instruments. Foreign exchange risk Our company is exposed to fluctuations in foreign currency cash flows related primarily to third-party purchases, intercompany transactions, and when applicable, nonfunctional currency denominated third-party debt.
Primary exposures include the U.S. dollar versus the euro, British pound, Australian dollar, Canadian dollar, Mexican peso, Brazilian real, Nigerian naira, Russian ruble and Egyptian pound, and in the case of inter-subsidiary transactions, the British pound versus the euro.
Primary exposures include the U.S. dollar versus the euro, British pound, Australian dollar, Canadian dollar, Mexican peso, Brazilian real, Nigerian naira, Polish Zloty and Egyptian pound, and in the case of inter-subsidiary transactions, the British pound versus the euro.
Additionally, volatile market conditions arising from the COVID-19 pandemic may result in significant changes in foreign exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar may negatively affect the translation of foreign currency denominated earnings to U.S. dollars.
Additionally, volatile market conditions arising from geopolitical events may result in significant changes in foreign exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar may negatively affect the translation of foreign currency denominated earnings to U.S. dollars.
Treasury rates, London Interbank Offered Rates (LIBOR), and commercial paper rates. We periodically use interest rate swaps and forward interest rate contracts to reduce interest rate volatility and funding costs associated with certain debt issues, and to achieve a desired proportion of variable versus fixed rate debt, based on current and projected market conditions.
Treasury rates, Secured Overnight Financing Rate (SOFR), and commercial paper rates. We periodically use interest rate swaps and forward interest rate contracts to reduce interest rate volatility and funding costs associated with certain debt issues, and to achieve a desired proportion of variable versus fixed rate debt, based on current and projected market conditions.
Assuming an unfavorable 10% change in year-end exchange rates, the settlement receivable would have decreased by $247 million, resulting in a net settlement obligation of $212 million at year-end 2021 and the settlement obligation would have increased by $272 million at year-end 2020.
Assuming an unfavorable 10% change in year-end exchange rates, the settlement obligation would have increased by $329 million, resulting in a net settlement obligation of $350 million at year-end 2023 and the settlement receivable would have decreased by $342 million at year-end 2022.
Primary exposures include corn, wheat, potato flakes, soybean oil, sugar, cocoa, cartonboard, natural gas, and diesel fuel. We have historically used the combination of long-term contracts with suppliers, and exchange-traded futures and option contracts to reduce price fluctuations in a desired percentage of forecasted raw material purchases over a duration of generally less than 18 months.
We have historically used the combination of long-term contracts with suppliers, and exchange-traded futures and option contracts to reduce price fluctuations in a desired percentage of forecasted raw material purchases over a duration of generally less than 18 months.
Assuming a 10% decrease in year-end commodity prices, the settlement obligation would have increased by $31 million at year-end 2021, and the settlement receivable would become a settlement obligation of approximately $22 million at year-end 2020, generally offset by a reduction in the cost of the underlying commodity purchases.
Assuming a 10% 54 decrease in year-end commodity prices, the settlement obligation would have increased by $11 million, resulting in a net settlement obligation of approximately $11 million at year-end 2023, and the settlement receivable would have decreased by approximately $18 million at year-end 2022, generally offset by a reduction in the cost of the underlying commodity purchases.
All of these derivatives were hedges of anticipated transactions, translational exposure, or existing assets or liabilities. Foreign currency contracts generally mature within 18 months and cross currency contracts mature with the related debt.
The total notional amount of foreign currency derivative instruments at year-end 2022 was $4.5 billion, representing a net settlement receivable of $153 million. All of these derivatives were hedges of anticipated transactions, translational exposure, or existing assets or liabilities. Foreign currency contracts generally mature within 18 months and cross currency contracts mature with the related debt.
These agreements call for the posting of collateral in the form of cash, treasury securities or letters of credit if a net liability position to us or our counterparties exceeds a certain amount. As of January 1, 2022 and January 2, 2021, collateral related to reciprocal collateralization agreements and margin deposits for exchange-traded commodity derivative instruments, were immaterial. 53
These agreements call for the posting of collateral in the form of cash, treasury securities or letters of credit if a net liability position to us or our counterparties exceeds a certain amount. As of December 30, 2023 and December 31, 2022, we had posted collateral of $59 million and $9 million, respectively.
The total notional amount of commodity derivative instruments at year-end 2020 was $314 million, representing a settlement receivable of approximately $8 million.
We continue to expect input cost inflation to be flat during 2024. The total notional amount of commodity derivative instruments at year-end 2023 was $201 million, representing a settlement obligation of less than a $1 million. The total notional amount of commodity derivative instruments at year-end 2022 was $230 million, representing a settlement receivable of approximately $2 million.
Assuming average variable rate debt levels during the year, a one percentage point increase in interest rates would have increased interest expense by approximately $13 million and $8 million at year-end 2021 and 2020, respectively. Price risk Our company is exposed to price fluctuations primarily as a result of anticipated purchases of raw and packaging materials, fuel, and energy.
The total notional amount of interest rate swaps at year-end 2022 was $2.7 billion, representing a net settlement obligation of $23 million. Assuming average variable rate debt levels during the year, a one percentage point increase in interest rates would have increased interest expense by approximately $14 million and $12 million at year-end 2023 and 2022, respectively.
The total notional amount of foreign currency derivative instruments, including cross currency swaps, at year-end 2021 was $4.2 billion, representing a settlement receivable of $35 million. The total notional amount of foreign currency derivative instruments at year-end 2020 was $4.3 billion, representing a settlement obligation of $33 million.
Forward contracts and options are generally less than 18 months duration. Currency swap agreements may be established in conjunction with the term of underlying debt issuances. The total notional amount of foreign currency derivative instruments, including cross currency swaps, at year-end 2023 was $4.8 billion, representing a net settlement obligation of $21 million.
The total notional amount of interest rate swaps at year-end 2021 was $2.8 billion, representing a settlement receivable of $4 million. The total notional amount of interest rate swaps at year-end 2020 was $2.6 billion, representing a settlement receivable of $46 million.
We entered into interest rate swaps, and in some instances terminated interest rate swaps, in connection with certain U.S. Dollar and Euro Notes. The total notional amount of interest rate swaps at year-end 2023 was $2.3 billion, representing a net settlement obligation of $93 million.
Removed
On December 31, 2021 the London Interbank Offered Rates (LIBOR) was discontinued. LIBOR will be phased out completely by June 30, 2023, and replaced by the Secured Overnight Financing Rate (SOFR). We will have exposure to LIBOR for existing interest rate swaps and forward interest rate contracts through the phase out period.
Added
During the second quarter of 2023, the Nigerian government removed certain currency restrictions over the Nigerian Naira leading to a significant decline in the exchange rate of the Naira to the U.S. dollar on the official market in Nigeria.
Removed
Interest rate swaps and forward interest rate contracts entered into after December 31, 2021 will be based on SOFR. We entered into interest rate swaps, and in some instances terminated interest rate swaps, in connection with certain U.S. Dollar and Euro Notes.
Added
As a result of this decline in the exchange rate, the U.S. dollar value of the assets, liabilities, expenses and revenues of our Nigerian business in our consolidated financial statements has decreased significantly compared to prior periods.
Removed
Additionally, certain ingredients, packaging and other goods and services have been impacted by the COVID-19 pandemic and inflationary pressures and we expect these supply pressures and market disruptions to continue into 2022. The total notional amount of commodity derivative instruments at year-end 2021 was $360 million, representing a settlement obligation of approximately $1 million.
Added
The consolidated assets of our Nigerian business represented approximately 5% of our consolidated assets as of December 30, 2023, compared to 8% as of December 31, 2022.
Added
Net sales of our Nigerian business were 8% of our consolidated net sales year-to-date period ended December 30, 2023, but could become a smaller percentage of our overall sales if exchange rates as of year-end persist or decline further in 2024. 53 In addition to our consolidated Nigerian business, the Company also has an investment in an unconsolidated entity, Tolaram Africa Foods PTE LTD (TAF), that holds an investment in a Nigerian food manufacturer.
Added
This investment is accounted for under the equity method of accounting and is evaluated for indicators of other than temporary impairment. During 2023, the Company recorded significant foreign currency translation adjustments due to the devaluation of the Nigerian Naira.
Added
The Company, following its accounting practice of recording the operations of its subsidiary, TAF, on a one-month lag basis has recognized these adjustments based on the foreign currency exchange rates as of the end of November 2023.
Added
Price risk Our company is exposed to price fluctuations primarily as a result of anticipated purchases of raw and packaging materials, fuel, and energy. Primary exposures include corn, wheat, potato flakes, soybean oil, sugar, cocoa, cartonboard, natural gas, and diesel fuel.
Added
Geopolitical instability, including wars and conflicts (including conflicts in Ukraine and the Middle East), actual and potential shifts in U.S. and foreign, trade, economic and other policies, as well as other global events, have resulted in certain impacts to the global economy, including market disruptions, supply chain challenges, and inflationary pressures.
Added
During the fiscal year ended December 30, 2023 we continued to experience elevated commodity and supply chain costs, including procurement and manufacturing costs, although certain supply chain challenges have eased. We continue to mitigate the dollar impact of this input cost inflation through the execution of productivity initiatives and revenue growth management actions.
Added
As of December 30, 2023 and December 31, 2022, margin deposits for exchange-traded commodity derivative instruments, were immaterial. 55

Other K 10-K year-over-year comparisons