Kellogg Company Reports Fourth Quarter and Full-Year 2015 Results, Reaffirms Guidance for 2016

- Full-year 2015 results met or exceeded initial guidance.

- Trends in the U.S. Cereal business continued to improve in the fourth quarter.

- Each of the company's international regions posted sales growth in the fourth quarter.

- The company continues to expect that it will meet previous currency-neutral guidance for net sales, operating profit, and earnings per share for the full-year 2016.

Feb 11, 2016, 08:00 ET from Kellogg Company

BATTLE CREEK, Mich., Feb. 11, 2016 /PRNewswire/ -- Kellogg Company (NYSE: K) today announced that fourth quarter 2015 reported net sales were $3.1 billion, a decrease of 10.6 percent from the fourth quarter of 2014.  Fourth quarter currency-neutral comparable net sales* increased by 4.2 percent.  Full-year 2015 reported net sales decreased by 7.2 percent to $13.5 billion.  Full-year currency-neutral comparable net sales increased by 1.2 percent.  Currency-neutral comparable net sales results include the impact of pricing in Venezuela.

The reported quarterly operating loss was $39 million; this included a significant mark-to-market adjustment of $393 million, which was primarily driven by the impact of asset returns on pension plans; the company's pension plans remain almost 90 percent funded.  Currency-neutral comparable operating profit* increased by 2.8 percent in the fourth quarter.  Full-year reported operating profit increased by 6.6 percent.  Full-year currency-neutral comparable operating profit decreased by 2.3 percent; this included a negative impact of 3 percent from the rebasing of incentive compensation.

Financial Summary:


Quarter ended


Year ended

(millions, except per share data)


January 2,

2016


January 3,

2015


%

Change


January 2,

2016


January 3,

2015


%

Change

Reported Net Sales


$

3,142


$

3,514


(10.6)%


$

13,525


$

14,580


(7.2)%

Comparable Net Sales *


$

3,123


$

3,320


(5.9)%


$

13,475


$

14,377


(6.3)%

Currency-Neutral Comparable Net Sales *


$

3,459


$

3,320


4.2%


$

14,544


$

14,377


1.2%

Reported Operating Profit (Loss)


$

(39)


$

(422)


90.9%


$

1,091


$

1,024


6.6%

Comparable Operating Profit *


$

440


$

462


(4.9)%


$

1,939


$

2,119


(8.5)%

Currency-Neutral Comparable

Operating Profit *


$

476


$

462


2.8


$

2,071


$

2,119


(2.3)%

Reported Net Income (Loss) Attributable

to Kellogg Company


$

(41)


$

(293)


86.0


$

614


$

632


(2.9)%

Comparable Net Income (Loss) Attributable to Kellogg Company *


$

279


$

298


(6.2)%


$

1,257


$

1,373


(8.4)%

Currency-Neutral Comparable Net Income

(Loss) Attributable to Kellogg Company *


$

299


$

298


0.8%


$

1,357


$

1,373


(1.1)%

Reported Diluted Earnings Per Share


$

(0.12)


$

(0.82)


85.4%


$

1.72


$

1.75


(1.7)%

Comparable Diluted Earnings Per Share *


$

0.79


$

0.84


(6.0)%


$

3.53


$

3.81


(7.3)%

Currency-Neutral Comparable Diluted

Earnings Per Share *


$

0.85


$

0.84


1.2%


$

3.81


$

3.81


* Non-GAAP financial measures. See the tables herein for important information regarding these measures and a full reconciliation to the most comparable GAAP measure.

The reported fourth quarter 2015 net loss was $41 million, or a loss of $0.12 per share; comparable earnings* were $0.79 per share; this represented a decrease of 6.0 percent from the fourth quarter of 2014's comparable earnings per share.  The translation of foreign currency lowered quarterly comparable earnings by $0.06 per share in the fourth quarter.  Reported full-year 2015 net earnings were $614 million, or $1.72 per share; comparable full-year earnings were $3.53 per share, a decrease of 7.3 percent from 2014's comparable earnings per share.  The translation of foreign currency lowered comparable earnings by $0.28 per share for the full year; as a result, full-year currency-neutral comparable earnings were $3.81 per share, in-line with the prior year's result.  Please see the table below and the appendices to this press release for detail regarding items that affect comparability.

Reconciliation of Reported to Currency-Neutral Comparable Earnings Per Share






Quarter ended


Year ended


January 2,
 2016

January 3,
 2015


January 2,
 2016

January 3,
 2015







Reported EPS

$

(0.12)


$

(0.82)



$

1.72


$

1.75


Mark-to-Market

(0.73)


(1.52)



(0.84)


(1.42)


Project K and cost reduction activities

(0.16)


(0.16)



(0.64)


(0.61)


Other Costs Impacting Comparability


(0.01)



0.14


(0.01)


Integration and Transaction Costs

(0.01)


(0.04)



(0.06)


(0.09)


Acquisitions/Dispositions




0.01



53rd Week


0.07




0.07


Remeasurement of Venezuelan Business

(0.01)




(0.42)









Comparable EPS

0.79


0.84



3.53


3.81


Foreign Exchange

(0.06)




(0.28)









Currency-Neutral Comparable EPS

$

0.85


$

0.84



$

3.81


$

3.81


 

"Our results in 2015 met or exceeded our initial expectations.  We saw good growth in many of our businesses, and importantly, trends continued to improve in the U.S. Cereal business," said John Bryant, Chairman and CEO.  "We're very pleased with the foundation that we've built.  We are committed to achieving our long-term goals for growth in 2016, supported by our increasing momentum and unprecedented productivity programs."

North America

Kellogg North America's reported net sales decreased by 8.0 percent in the fourth quarter and decreased by 4.3 percent for the full year.  Currency-neutral comparable net sales declined by 0.4 percent for the fourth quarter and by 1.6 percent for the full year.  The U.S. Morning Foods segment posted an increase in comparable net sales of 1.5 percent in the fourth quarter and a decrease of 1.6 percent for the full year.  The performance in the fourth quarter was the result of improving trends in the U.S. Cereal business.  U.S. Snacks posted a decline in comparable net sales of 1.9 percent in the fourth quarter and a decline of 1.6 percent for the full year.  However, consumption improved sequentially in each of the categories in the segment.  The U.S. Specialty Channels business posted an increase in comparable net sales of 1.5 percent in the fourth quarter and an increase of 0.7 percent for the full year.  The North America Other business posted a decline in currency-neutral comparable net sales of 2.0 percent in the fourth quarter and a decline of 3.2 percent for the full year.  This was driven by a decline in trade inventory due to a shift to new packaging in the MorningStar Farms business and results from the Kashi business; Kashi's performance improved over the course of the year.

International

Currency-neutral comparable net sales growth in the Latin American business was 45.3 percent in the fourth quarter, largely due to the impact of the Venezuelan business; currency-neutral comparable growth for the full year was 24.6 percent, also largely due to the impact of the Venezuelan business.  Currency-neutral comparable net sales in our European business increased by 1.6 percent in the fourth quarter and decreased by 0.6 percent for the full year.  The good performance in the quarter resulted from excellent growth in the Snacks business, including Pringles.  The Asia Pacific business posted an increase in currency-neutral comparable net sales of 3.3 percent in the fourth quarter and an increase of 4.0 percent for the full year, driven by strong rates of growth in the Asian business.

The Chinese and West African joint ventures performed well in the fourth quarter.

Interest and Tax

Kellogg's interest expense totaled $59 million in the fourth quarter and was $227 million for the year.  The comparable effective tax rate* was 24.7 percent for the fourth quarter and was 25.6 percent for the full year; both rates were lower than original expectations due to tax-planning initiatives and discrete items.

Cash flow

Cash flow,* a non-GAAP measure defined as cash from operating activities less capital expenditures, was $1.14 billion for the full year; slightly greater than expected due to excellent management of working capital.  Kellogg repurchased $731 million of shares during the year.

Kellogg Reaffirms Previous Guidance for 2016, Provides Guidance for Cash Flow

In addition, Kellogg Company continues to expect that, in 2016, it will achieve its long-term target for currency-neutral comparable net sales of between 1 percent and 3 percent, and its long-term target for currency-neutral comparable operating profit growth of between 4 percent and 6 percent.  The company expects growth in currency-neutral comparable earnings per share of between 6 percent and 8 percent.  Guidance for operating profit excludes the impact of mark-to-market adjustments, integration costs, costs related to Project K, acquisitions, dispositions, foreign-currency translation, remeasurement of the Venezuelan business, and other items that could affect comparability.  Guidance for earnings per share excludes the impact of mark-to-market adjustments, integration costs, costs related to Project K, foreign-currency translation, remeasurement of the Venezuelan business, and other items that could affect comparability; it includes the impact of acquisitions and dispositions.  The company also announced today that it expects full-year cash flow to be approximately $1.1 billion.  Capital expenditure for the year is expected to be between four percent and five percent of sales, including the impact of the cash required by Project K and an increase in capital spending equal to approximately one percent of sales to support the growth of the Pringles business.

Separately, Kellogg Company's Board of Directors has approved a $1.5 billion share-repurchase program that will run through 2016 and 2017.

Conference Call / Webcast

Kellogg will host a conference call to discuss these results on Thursday, February 11, 2016 at 9:30 a.m. Eastern Time.  The conference call and accompanying presentation slides will be broadcast live over the Internet at http://investor.kelloggs.com.  Analysts and institutional investors may participate in the Q&A session by dialing (855) 209-8258 in the U.S., and (412) 542-4104 outside of the U.S.  Members of the media and the public are invited to attend in a listen-only mode.  Information regarding the rebroadcast is available at http://investor.kelloggs.com.

About Kellogg Company

At Kellogg Company (NYSE: K), we are driven to enrich and delight the world through foods and brands that matter. With 2015 sales of more than $13 billion, Kellogg is the world's leading cereal company; second largest producer of cookies and crackers; a leading producer of savory snacks; and a leading North American frozen foods company.  Every day, our well-loved brands nourish families so they can flourish and thrive. These brands include Kellogg's®, Keebler®, Special K®, Pringles®, Kellogg's Frosted Flakes®, Pop-Tarts®, Kellogg's Corn Flakes®, Rice Krispies®, Kashi®, Cheez-It®, Eggo®, Coco Pops®, Mini-Wheats®, and many more. To learn more about our responsible business leadership, foods that delight and how we strive to make a difference in our communities around the world, visit www.kelloggcompany.com.

Use of Non-GAAP Financial Measures

Certain financial measures have been provided on a non-GAAP (Generally Accepted Accounting Principles) basis.  Management believes the use of such non-GAAP measures provides increased transparency and assists investors in understanding the underlying operating performance of the company and its segments and in the analysis of ongoing operating trends.  All non-GAAP financial measures have been reconciled with the most directly comparable GAAP financial measures in the attachments provided with the release.

Forward-Looking Statements Disclosure

This news release contains, or incorporates by reference, "forward-looking statements" with projections concerning, among other things, the Company's efficiency-and-effectiveness program (Project K), the integration of acquired businesses, the Company's strategy, zero-based budgeting, and the Company's sales, earnings, margin, operating profit, costs and expenditures, interest expense, tax rate, capital expenditure, dividends, cash flow, debt reduction, share repurchases, costs, charges, rates of return, brand building, ROIC, working capital, growth, new products, innovation, cost reduction projects, workforce reductions, savings, and competitive pressures.  Forward-looking statements include predictions of future results or activities and may contain the words "expects," "believes," "should," "will," "anticipates," "projects," "estimates,"  "implies," "can," or words or phrases of similar meaning.The Company's actual results or activities may differ materially from these predictions.  The Company's future results could also be affected by a variety of factors, including the ability to implement Project K as planned, whether the expected amount of costs associated with Project K will differ from forecasts, whether the Company will be able to realize the anticipated benefits from Project K in the amounts and times expected, the ability to realize the anticipated benefits and synergies from business acquisitions in the amounts and at the times expected, the impact of competitive conditions; the effectiveness of pricing, advertising, and promotional programs; the success of innovation, renovation and new product introductions; the recoverability of the carrying value of goodwill and other intangibles; the success of productivity improvements and business transitions; commodity and energy prices; labor costs; disruptions or inefficiencies in supply chain; the availability of and interest rates on short-term and long-term financing; actual market performance of benefit plan trust investments; the levels of spending on systems initiatives, properties, business opportunities, integration of acquired businesses, and other general and administrative costs; changes in consumer behavior and preferences; the effect of U.S. and foreign economic conditions on items such as interest rates, statutory tax rates, currency conversion and availability; legal and regulatory factors including changes in food safety, advertising and labeling laws and regulations; the ultimate impact of product recalls; business disruption or other losses from war, terrorist acts or political unrest; and other items.

Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to update them publicly.

K-FIN

 

Kellogg Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

(millions, except per share data)





Quarter ended


Year ended

(Results are unaudited)


January 2,
 2016


January 3,
 2015


January 2,
 2016


January 3,
 2015

Net sales


$

3,142



$

3,514



$

13,525



$

14,580


Cost of goods sold


2,180



2,658



8,844



9,517


Selling, general and administrative expense


1,001



1,278



3,590



4,039


Operating profit


(39)



(422)



1,091



1,024


Interest expense


59



53



227



209


Other income (expense), net


(13)



(4)



(91)



10


Income before income taxes


(111)



(479)



773



825


Income taxes


(68)



(187)



159



186


Earnings (loss) from unconsolidated affiliates


3



(1)





(6)


Net income


$

(40)



$

(293)



$

614



$

633


Net income (loss) attributable to noncontrolling
interests


1







1


Net income attributable to Kellogg Company


$

(41)



$

(293)



$

614



$

632


Per share amounts:









Basic


$

(0.12)



$

(0.82)



$

1.74



$

1.76


Diluted


$

(0.12)



$

(0.82)



$

1.72



$

1.75


Dividends per share


$

0.50



$

0.49



$

1.98



$

1.90


Average shares outstanding:









Basic


353



355



354



358


Diluted


353



355



356



360


Actual shares outstanding at period end






350



356


 

 

Kellogg Company and Subsidiaries

SELECTED OPERATING SEGMENT DATA


(millions)






Quarter ended


Year ended

(Results are unaudited)


January 2,
 2016


January 3,
 2015


January 2,
 2016


January 3,
 2015

Net sales









U.S. Morning Foods


$

712



$

768



$

2,992



$

3,108


U.S. Snacks


750



807



3,234



3,329


U.S. Specialty


269



280



1,181



1,198


North America Other


389



448



1,687



1,864


Europe


612



677



2,497



2,869


Latin America


190



287



1,015



1,205


Asia Pacific


220



247



919



1,007


Consolidated


$

3,142



$

3,514



$

13,525



$

14,580


Operating profit









U.S. Morning Foods


$

106



$

101



$

474



$

479


U.S. Snacks


83



95



385



364


U.S. Specialty


60



57



260



266


North America Other


38



69



178



295


Europe


56



58



247



232


Latin America


7



24



9



169


Asia Pacific


18



14



54



53


Total Reportable Segments


368



418



1,607



1,858


Corporate


(407)



(840)



(516)



(834)


Consolidated


$

(39)



$

(422)



$

1,091



$

1,024











 

 

Kellogg Company and Subsidiaries

CONSOLIDATED STATEMENT OF CASH FLOWS

(millions)





Year ended

(unaudited)


January 2,
 2016


January 3,
 2015

Operating activities





Net income


$

614



$

633


Adjustments to reconcile net income to operating cash flows:





Depreciation and amortization


534



503


Postretirement benefit plan expense (benefit)


320



803


Deferred income taxes


(169)



(254)


Stock compensation


51



37


Venezuela remeasurement expense


169




VIE deconsolidation


(49)




Other


(13)



(125)


Postretirement benefit plan contributions


(33)



(53)


Changes in operating assets and liabilities, net of acquisitions


267



249


Net cash provided by (used in) operating activities


1,691



1,793


Investing activities





Additions to properties


(553)



(582)


Acquisitions, net of cash acquired


(161)




Investments in unconsolidated entities


(456)



(6)


Other


43



15


Net cash provided by (used in) investing activities


(1,127)



(573)


Financing activities





Net issuances (reductions) of notes payable


374



89


Issuances of long-term debt


696



952


Reductions of long-term debt


(606)



(960)


Net issuances of common stock


261



217


Common stock repurchases


(731)



(690)


Cash dividends


(700)



(680)


Other




9


Net cash provided by (used in) financing activities


(706)



(1,063)


Effect of exchange rate changes on cash and cash equivalents


(50)



13


Increase (decrease) in cash and cash equivalents


(192)



170


Cash and cash equivalents at beginning of period


443



273


Cash and cash equivalents at end of period


251



$

443


Supplemental financial data:





Net cash provided by (used in) operating activities


$

1,691



$

1,793


Additions to properties


(553)



(582)


Cash Flow (operating cash flow less property additions) (a)


$

1,138



$

1,211


 

(a) 

We use this non-GAAP measure of cash flow to focus management and investors on the amount of cash available for debt reduction, dividend distributions, acquisition opportunities, and share repurchase.

 

 

Kellogg Company and Subsidiaries

CONSOLIDATED BALANCE SHEET

(millions, except per share data)





January 2,
 2016


January 3,
 2015



(unaudited)


*

Current assets





Cash and cash equivalents


$

251



$

443


Accounts receivable, net


1,344



1,276


Inventories:





Raw materials and supplies


315



327


Finished goods and materials in process


935



952


Deferred income taxes


227



184


Other prepaid assets


164



158


Total current assets


3,236



3,340


Property, net of accumulated depreciation of $5,236 and $5,526


3,621



3,769


Investments in unconsolidated entities


456



1


Goodwill


4,968



4,971


Other intangibles, net of accumulated amortization of $47 and $43


2,268



2,295


Pension


231



250


Other assets


485



527


Total assets


$

15,265



$

15,153


Current liabilities





Current maturities of long-term debt


$

1,266



$

607


Notes payable


1,204



828


Accounts payable


1,907



1,528


Accrued advertising and promotion


447



446


Accrued income taxes


42



39


Accrued salaries and wages


325



320


Other current liabilities


548



596


Total current liabilities


5,739



4,364


Long-term debt


5,289



5,935


Deferred income taxes


685



726


Pension liability


946



777


Nonpension postretirement benefits


77



82


Other liabilities


391



418


Commitments and contingencies





Equity





Common stock, $.25 par value


105



105


Capital in excess of par value


745



678


Retained earnings


6,597



6,689


Treasury stock, at cost


(3,943)



(3,470)


Accumulated other comprehensive income (loss)


(1,376)



(1,213)


Total Kellogg Company equity


2,128



2,789


Noncontrolling interests


10



62


Total equity


2,138



2,851


Total liabilities and equity


$

15,265



$

15,153


* Condensed from audited financial statements.

 

Kellogg Company and Subsidiaries

Reconciliation of As Reported Results to Currency-Neutral Comparable Results

(millions, except per share data)



Quarter ended

January 2, 2016


January 3, 2015

(Results are unaudited)

As

reported

Comparable

adjustments

Currency-neutral

 comparable


As

reported

Comparable

adjustments

Currency-neutral

 comparable

Net sales

$

3,142


$

(317)


$

3,459



$

3,514


$

194


$

3,320


Cost of goods sold

2,180


48


2,132



2,658


631


2,027


Selling, general and administrative expense

1,001


150


851



1,278


447


831


Operating profit

(39)


(515)


476



(422)


(884)


462


Interest expense

59


(1)


60



53



53


Other income (expense), net

(13)


11


(24)



(4)



(4)


Income before income taxes

(111)


(503)


392



(479)


(884)


405


Income taxes

(68)


(163)


95



(187)


(293)


106


Earnings (loss) from joint ventures

3



3



(1)



(1)


Net income

$

(40)


$

(340)


$

300



$

(293)


$

(591)


$

298


Net income (loss) attributable to noncontrolling
interests

1



1






Net income attributable to Kellogg Company

$

(41)


$

(340)


$

299



$

(293)


$

(591)


$

298


Per share amounts:








Basic

$

(0.12)


$

(0.97)


$

0.85



$

(0.82)


$

(1.66)


$

0.84


Diluted

$

(0.12)


$

(0.97)


$

0.85



$

(0.82)


$

(1.66)


$

0.84


Average shares outstanding:








Basic

353



353



355



355


Diluted

353



356



355



355










Year ended

January 2, 2016


January 3, 2015

(Results are unaudited)

As

reported

Comparable

adjustments

Currency-neutral

 comparable


As

reported

Comparable

adjustments

Currency-neutral

 comparable

Net sales

$

13,525


$

(1,019)


$

14,544



$

14,580


$

203


$

14,377


Cost of goods sold

8,844


(58)


8,902



9,517


738


8,779


Selling, general and administrative expense

3,590


19


3,571



4,039


560


3,479


Operating profit

1,091


(980)


2,071



1,024


(1,095)


2,119


Interest expense

227


(4)


231



209



209


Other income (expense), net

(91)


(59)


(32)



10



10


Income before income taxes

773


(1,035)


1,808



825


(1,095)


1,920


Income taxes

159


(292)


451



186


(354)


540


Earnings (loss) from joint ventures





(6)



(6)


Net income

$

614


$

(743)


$

1,357



$

633


$

(741)


$

1,374


Net income (loss) attributable to noncontrolling interests





1



1


Net income attributable to Kellogg Company

$

614


$

(743)


$

1,357



$

632


$

(741)


$

1,373


Per share amounts:








Basic

$

1.74


$

(2.10)


$

3.84



$

1.76


$

(2.07)


$

3.83


Diluted

$

1.72


$

(2.09)


$

3.81



$

1.75


$

(2.06)


$

3.81


Average shares outstanding:








Basic

354



354



358



358


Diluted

356



356



360



360


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

 

Kellogg Company and Subsidiaries

Supplement to Reconciliation of As Reported Results to Currency-Neutral Comparable Results

(millions, except per share data)



Quarter ended January 2, 2016









(Results are unaudited)

Mark-to-

market

Project K and cost reduction activities

Other costs impacting comparability

Integration

costs

Acquisitions/

divestitures

Shipping

day

differences

Venezuela

remeasurement

Foreign

currency

impact

Comparable

adjustments

Net sales

$


$


$


$


$

19


$


$


$

(336)


$

(317)


Cost of goods sold

236


37



3


16



2


(246)


48


Selling, general and administrative expense

151


43



5


3



2


(54)


150


Operating profit

(387)


(80)



(8)




(4)


(36)


(515)


Interest expense








(1)


(1)


Other income (expense), net





1




10


11


Income before income taxes

(387)


(80)



(8)


1



(4)


(25)


(503)


Income taxes

(130)


(25)



(3)





(5)


(163)


Earnings (loss) from joint ventures










Net income

$

(257)


$

(55)


$


$

(5)


$

1


$


$

(4)


$

(20)


$

(340)


Net income (loss) attributable to noncontrolling interests










Net income attributable to Kellogg Company

$

(257)


$

(55)


$


$

(5)


$

1


$


$

(4)


$

(20)


$

(340)


Per share amounts:










Basic

$

(0.73)


$

(0.16)


$


$

(0.01)


$


$


$

(0.01)


$

(0.06)


$

(0.97)


Diluted

$

(0.73)


$

(0.16)


$


$

(0.01)


$


$


$

(0.01)


$

(0.06)


$

(0.97)












Quarter ended January 3, 2015









(Results are unaudited)

Mark-to-

market

Project K and cost reduction activities

Other costs impacting comparability

Integration

costs

Acquisitions/

divestitures

Shipping

day

differences

Venezuela

remeasurement

Foreign

currency

impact

Comparable

adjustments

Net sales

$


$

(2)


$


$

(1)


$


$

197


$


$


$

194


Cost of goods sold

476


32



6



117




631


Selling, general and administrative expense

346


40


6


11



44




447


Operating profit

(822)


(74)


(6)


(18)



36




(884)


Interest expense










Other income (expense), net










Income before income taxes

(822)


(74)


(6)


(18)



36




(884)


Income taxes

(279)


(18)


(2)


(5)



11




(293)


Earnings (loss) from joint ventures










Net income

$

(543)


$

(56)


$

(4)


$

(13)


$


$

25


$


$


$

(591)


Net income (loss) attributable
to noncontrolling interests










Net income attributable to Kellogg Company

$

(543)


$

(56)


$

(4)


$

(13)


$


$

25


$


$


$

(591)


Per share amounts:










Basic

$

(1.52)


$

(0.16)


$

(0.01)


$

(0.04)


$


$

0.07


$


$


$

(1.66)


Diluted

$

(1.52)


$

(0.16)


$

(0.01)


$

(0.04)


$


$

0.07


$


$


$

(1.66)


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

 

Kellogg Company and Subsidiaries

Supplement to Reconciliation of As Reported Results to Currency-Neutral Comparable Results

(millions, except per share data)



Year ended January 2, 2016









(Results are unaudited)

Mark-to-

market

Project K and cost reduction activities

Other costs impacting comparability

Integration

costs

Acquisitions/

divestitures

Shipping

day

differences

Venezuela

remeasurement

Foreign

currency

impact

Comparable

adjustments

Net sales

$


$

(4)


$


$

(1)


$

58


$

(3)


$


$

(1,069)


$

(1,019)


Cost of goods sold

296


191



14


46


(3)


112


(714)


(58)


Selling, general and
administrative expense

150


128


(67)


15


8



8


(223)


19


Operating profit

(446)


(323)


67


(30)


4



(120)


(132)


(980)


Interest expense








(4)


(4)


Other income (expense), net



(19)





(49)


9


(59)


Income before income taxes

(446)


(323)


48


(30)


4



(169)


(119)


(1,035)


Income taxes

(148)


(94)


(2)


(8)


(1)



(20)


(19)


(292)


Earnings (loss) from joint ventures










Net income

$

(298)


$

(229)


$

50


$

(22)


$

5


$


$

(149)


$

(100)


$

(743)


Net income (loss) attributable to noncontrolling interests










Net income attributable to Kellogg Company

$

(298)


$

(229)


$

50


$

(22)


$

5


$


$

(149)


$

(100)


$

(743)


Per share amounts:










Basic

$

(0.84)


$

(0.65)


$

0.14


$

(0.06)


$

0.01


$


$

(0.42)


$

(0.28)


$

(2.10)


Diluted

$

(0.84)


$

(0.64)


$

0.14


$

(0.06)


$

0.01


$


$

(0.42)


$

(0.28)


$

(2.09)












Year ended January 3, 2015









(Results are unaudited)

Mark-to-

market

Project K and cost reduction activities

Other costs impacting comparability

Integration

costs

Acquisitions/

divestitures

Shipping

day

differences

Venezuela

remeasurement

Foreign

currency

impact

Comparable

adjustments

Net sales

$


$

(2)


$


$

(1)


$

9


$

197


$


$


$

203


Cost of goods sold

438


152



22


9


117




738


Selling, general and administrative expense

346


144


6


20



44




560


Operating profit

(784)


(298)


(6)


(43)



36




(1,095)


Interest expense










Other income (expense), net










Income before income taxes

(784)


(298)


(6)


(43)



36




(1,095)


Income taxes

(271)


(80)


(2)


(12)



11




(354)


Earnings (loss) from joint ventures










Net income

$

(513)


$

(218)


$

(4)


$

(31)


$


$

25


$


$


$

(741)


Net income (loss) attributable to noncontrolling interests










Net income attributable to Kellogg Company

$

(513)


$

(218)


$

(4)


$

(31)


$


$

25


$


$


$

(741)


Per share amounts:










Basic

$

(1.43)


$

(0.61)


$

(0.01)


$

(0.09)


$


$

0.07


$


$


$

(2.07)


Diluted

$

(1.42)


$

(0.61)


$

(0.01)


$

(0.09)


$


$

0.07


$


$


$

(2.06)


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

 

Kellogg Company and Subsidiaries

Restructuring and cost reduction activities

(Pre-tax millions)





Quarter ended January 2, 2016


Year ended January 2, 2016



Net Sales


Cost of

goods

sold


Selling, general

and

administrative

expense


Total


Net Sales


Cost of

goods

sold


Selling, general

and

administrative

expense


Total

2015

















U.S. Morning Foods


$



$

3



$

4



$

7



$



$

46



$

12



$

58


U.S. Snacks




10



6



16





33



17



50


U.S. Specialty






2



2







5



5


North America Other




20



3



23



2



55



6



63


Europe




14



4



18



2



57



15



74


Latin America






2



2





2



2



4


Asia Pacific




1



2



3





9



4



13


Corporate




(11)



20



9





(11)



67



56


Total


$



$

37



$

43



$

80



$

4



$

191



$

128



$

323




Quarter ended January 3, 2015


Year ended January 3, 2015



Net Sales


Cost of

goods

sold


Selling, general

and

administrative

expense


Total


Net Sales


Cost of

goods

sold


Selling, general

and

administrative

expense


Total

2014

















U.S. Morning Foods


$



$

16



$

3



$

19



$



$

52



$

8



$

60


U.S. Snacks




12



3



15





51



6



57


U.S. Specialty






1



1





1



2



3


North America Other


1



5



1



7



1



13



4



18


Europe




7



10



17





37



43



80


Latin America


1





1



2



1



1



6



8


Asia Pacific




12



3



15





29



8



37


Corporate




(20)



18



(2)





(32)



67



35


Total


$

2



$

32



$

40



$

74



$

2



$

152



$

144



$

298


2015 Variance - better(worse)
than 2014

















U.S. Morning Foods


$



$

13



$

(1)



$

12



$



$

6



$

(4)



$

2


U.S. Snacks




2



(3)



(1)





18



(11)



7


U.S. Specialty






(1)



(1)





1



(3)



(2)


North America Other


1



(15)



(2)



(16)



(1)



(42)



(2)



(45)


Europe




(7)



6



(1)



(2)



(20)



28



6


Latin America


1





(1)





1



(1)



4



4


Asia Pacific




11



1



12





20



4



24


Corporate




(9)



(2)



(11)





(21)





(21)


Total


$

2



$

(5)



$

(3)



$

(6)



$

(2)



$

(39)



$

16



$

(25)


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

 

Kellogg Company and Subsidiaries

Integration and transaction costs

(Pre-tax millions)





Quarter ended January 2, 2016


Year ended January 2, 2016



Net Sales


Cost of 
goods

sold


Selling, general and

administrative

expense


Total


Net Sales


Cost of 
goods

sold


Selling, general and

administrative

expense


Total

2015

















Europe


$



$



$

3



$

3



$



$

5



$

6



$

11


Latin America






1



1





1



2



3


Asia Pacific




3



1



4



1



8



5



14


Corporate














2



2


Total


$



$

3



$

5



$

8



$

1



$

14



$

15



$

30




Quarter ended January 3, 2015


Year ended January 3, 2015



Net Sales


Cost of goods

sold


Selling, general and

administrative

expense


Total


Net Sales


Cost of goods

sold


Selling, general and

administrative

expense


Total

2014

















Europe


$



$

4



$

11



$

15



$



$

18



$

18



$

36


Latin America

















Asia Pacific


1



2



1



4



1



4



2



7


Corporate






(1)



(1)










Total


$

1



$

6



$

11



$

18



$

1



$

22



$

20



$

43


2015 Variance - better(worse)
than 2014

















Europe


$



$

4



$

8



$

12



$



$

13



$

12



$

25


Latin America






(1)



(1)





(1)



(2)



(3)


Asia Pacific


1



(1)









(4)



(3)



(7)


Corporate






(1)



(1)







(2)



(2)


Total


$

1



$

3



$

6



$

10



$



$

8



$

5



$

13


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

 

Kellogg Company and Subsidiaries

Venezuela remeasurement

(Pre-tax millions)





Quarter ended January 2, 2016


Year ended January 2, 2016



Cost of

goods

sold


Selling, general

and

administrative

expense


Other

(income)

expense


Total


Cost of

goods

sold


Selling, general

and

administrative

expense


Other

(income)

expense


Total

2015

















Latin America


$

2



$

2



$



$

4



$

111



$

8



$

10



$

129


Corporate










1





39



40


Total


$

2



$

2



$



$

4



$

112



$

8



$

49



$

169




Quarter ended January 3, 2015


Year ended January 3, 2015



Cost of

goods

sold


Selling, general

and

administrative

expense


Other

(income)

expense


Total


Cost of

goods

sold


Selling, general

and

administrative

expense


Other

(income)

expense


Total

2014

















Latin America


$



$



$



$



$



$



$



$


Corporate

















Total


$



$



$



$



$



$



$



$


2015 Variance - better(worse)
than 2014

















Latin America


$

(2)



$

(2)



$



$

(4)



$

(111)



$

(8)



$

(10)



$

(129)


Corporate










(1)





(39)



(40)


Total


$

(2)



$

(2)



$



$

(4)



$

(112)



$

(8)



$

(49)



$

(169)


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

 

Kellogg Company and Subsidiaries

Reconciliation of Non-GAAP Amounts - Reported Net Sales to Currency-Neutral Comparable Net Sales




Quarter ended January 2, 2016

















(millions)


U.S.

Morning

Foods


U.S.

Snacks


U.S.

Specialty


North

America

Other


Total North

America


Europe


Latin

America


Asia

Pacific


Corporate


Kellogg

Consolidated

Reported Net Sales


$

712



$

750



$

269



$

389



$

2,120



$

612



$

190



$

220



$



$

3,142


Project K and cost reduction activities





















Integration and transaction costs





















Acquisitions/divestitures












19









19


Differences in shipping

days





















Comparable Net Sales


$

712



$

750



$

269



$

389



$

2,120



$

593



$

190



$

220



$



$

3,123


Foreign currency impact








(20)



(20)



(62)



(226)



(28)





(336)


Currency-Neutral Comparable Net Sales


$

712



$

750



$

269



$

409



$

2,140



$

655



$

416



$

248



$



$

3,459


Quarter ended January 3, 2015

















(millions)


U.S.

Morning

Foods


U.S.

Snacks


U.S.

Specialty


North

America

Other


Total North

America


Europe


Latin

America


Asia

Pacific


Corporate


Kellogg

Consolidated

Reported Net Sales


$

768



$

807



$

280



$

448



$

2,303



$

677



$

287



$

247



$



$

3,514


Project K and cost reduction activities








(1)



(1)





(1)







(2)


Integration and transaction costs
















(1)





(1)


Acquisitions/divestitures





















Differences in shipping

days


66



44



16



30



156



32



1



8





197


Comparable Net Sales


$

702



$

763



$

264



$

419



$

2,148



$

645



$

287



$

240



$



$

3,320


Foreign currency impact





















Currency-Neutral Comparable Net Sales


$

702



$

763



$

264



$

419



$

2,148



$

645



$

287



$

240



$



$

3,320


% change - 2015 vs. 2014:

















As Reported


(7.3)

%


(7.2)

%


(4.0)

%


(13.1)

%


(8.0)

%


(9.6)

%


(33.7)

%


(11.0)

%


%


(10.6)

%

Project K and cost reduction activities


%


%


%


0.2

%


%


%


%


%


%


%

Integration and transaction costs


%


%


%


%


%


%


%


%


%


%

Acquisitions/divestitures


%


%


%


%


%


2.7

%


%


%


%


0.5

%

Differences in shipping days


(8.8)

%


(5.3)

%


(5.5)

%


(6.2)

%


(6.6)

%


(4.4)

%


(0.2)

%


(3.3)

%


%


(5.2)

%

Comparable growth


1.5

%


(1.9)

%


1.5

%


(7.1)

%


(1.4)

%


(7.9)

%


(33.5)

%


(7.7)

%


%


(5.9)

%

Foreign currency impact


%


%


%


(5.1)

%


(1.0)

%


(9.5)

%


(78.8)

%


(11.0)

%


%


(10.1)

%

Currency-Neutral Comparable growth


1.5

%


(1.9)

%


1.5

%


(2.0)

%


(0.4)

%


1.6

%


45.3

%


3.3

%


%


4.2

%

Volume (tonnage)










(1.3)

%


2.6

%


(2.4)

%


4.7

%


%


(0.1)

%

Pricing/mix










0.9

%


(1.0)

%


47.7

%


(1.4)

%


%


4.3

%

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

 

Kellogg Company and Subsidiaries

Reconciliation of Non-GAAP Amounts - Reported Net Sales to Currency-Neutral Comparable Net Sales



Year ended January 2, 2016















(millions)


U.S.

Morning

Foods


U.S.

Snacks


U.S.

Specialty


North

America

Other


Total
North

America


Europe


Latin

America


Asia

Pacific


Corporate


Kellogg

Consolidated

Reported Net Sales


$

2,992



$

3,234



$

1,181



$

1,687



$

9,094



$

2,497



$

1,015



$

919



$



$

13,525


Project K and cost reduction activities








(2)



(2)



(2)









(4)


Integration and transaction costs
















(1)





(1)


Acquisitions/divestitures












58









58


Differences in shipping

days












(3)









(3)


Comparable Net Sales


$

2,992



$

3,234



$

1,181



$

1,689



$

9,096



$

2,444



$

1,015



$

920



$



$

13,475


Foreign currency impact








(86)



(86)



(376)



(486)



(121)





(1,069)


Currency-Neutral Comparable Net Sales


$

2,992



$

3,234



$

1,181



$

1,775



$

9,182



$

2,820



$

1,501



$

1,041



$



$

14,544


Year ended January 3, 2015















(millions)


U.S.

Morning

Foods


U.S.

Snacks


U.S.

Specialty


North

America

Other


Total
North

America


Europe


Latin

America


Asia

Pacific


Corporate


Kellogg

Consolidated

Reported Net Sales


$

3,108



$

3,329



$

1,198



$

1,864



$

9,499



$

2,869



$

1,205



$

1,007



$



$

14,580


Project K and cost reduction activities








(1)



(1)





(1)







(2)


Integration and transaction costs
















(1)





(1)


Acquisitions/divestitures






9





9











9


Differences in shipping

days


66



44



16



30



156



32



1



8





197


Comparable Net Sales


$

3,042



$

3,285



$

1,173



$

1,835



$

9,335



$

2,837



$

1,205



$

1,000



$



$

14,377


Foreign currency impact





















Currency-Neutral Comparable Net Sales


$

3,042



$

3,285



$

1,173



$

1,835



$

9,335



$

2,837



$

1,205



$

1,000



$



$

14,377


% change - 2015 vs. 2014:

















As Reported


(3.7)

%


(2.9)

%


(1.4)

%


(9.5)

%


(4.3)

%


(13.0)

%


(15.8)

%


(8.8)

%


%


(7.2)

%

Project K and cost reduction activities


%


%


%


%


%


(0.1)

%


%


%


%


%

Integration and transaction costs


%


%


%


%


%


%


%


(0.1)

%


%


%

Acquisitions/divestitures


%


%


(0.8)

%


%


(0.1)

%


2.0

%


%


%


%


0.4

%

Differences in shipping days


(2.1)

%


(1.3)

%


(1.3)

%


(1.5)

%


(1.6)

%


(1.1)

%


%


(0.8)

%


%


(1.3)

%

Comparable growth


(1.6)

%


(1.6)

%


0.7

%


(8.0)

%


(2.6)

%


(13.8)

%


(15.8)

%


(7.9)

%


%


(6.3)

%

Foreign currency impact


%


%


%


(4.8)

%


(1.0)

%


(13.2)

%


(40.4)

%


(11.9)

%


%


(7.5)

%

Currency-Neutral Comparable growth


(1.6)

%


(1.6)

%


0.7

%


(3.2)

%


(1.6)

%


(0.6)

%


24.6

%


4.0

%


%


1.2

%

Volume (tonnage)










(1.8)

%


(0.1)

%


0.2

%


6.6

%


%


(0.7)

%

Pricing/mix










0.2

%


(0.5)

%


24.4

%


(2.6)

%


%


1.9

%

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

 

Kellogg Company and Subsidiaries

Reconciliation of Non-GAAP Amounts - Reported Operating Profit to Currency-Neutral Comparable Operating Profit



Quarter ended January 2, 2016

















(millions)


U.S.

Morning

Foods


U.S.

Snacks


U.S.

Specialty


North

America

Other


Total North

America


Europe


Latin

America


Asia

Pacific


Corporate


Kellogg

Consolidated

Reported


$

106



$

83



$

60



$

38



$

287



$

56



$

7



$

18



$

(407)



$

(39)


Mark-to-market


















(387)



(387)


Project K and cost reduction activities


(7)



(16)



(2)



(23)



(48)



(18)



(2)



(3)



(9)



(80)


Other costs impacting comparability





















Integration and transaction costs












(3)



(1)



(4)





(8)


Acquisitions/divestitures





















Differences in shipping

days





















Venezuela remeasurement














(4)







(4)


Comparable


$

113



$

99



$

62



$

61



$

335



$

77



$

14



$

25



$

(11)



$

440


Foreign currency impact








(2)



(2)



(4)



(27)



(4)



1



(36)


Currency-Neutral Comparable


$

113



$

99



$

62



$

63



$

337



$

81



$

41



$

29



$

(12)



$

476


Quarter ended January 3, 2015

















(millions)


U.S.

Morning

Foods


U.S.

Snacks


U.S.

Specialty


North

America

Other


Total North

America


Europe


Latin

America


Asia

Pacific


Corporate


Kellogg

Consolidated

Reported


$

101



$

95



$

57



$

69



$

322



$

58



$

24



$

14



$

(840)



$

(422)


Mark-to-market


















(822)



(822)


Project K and cost reduction activities


(19)



(15)



(1)



(7)



(42)



(17)



(2)



(15)



2



(74)


Other costs impacting comparability


















(6)



(6)


Integration and transaction costs












(15)





(4)



1



(18)


Acquisitions/divestitures





















Differences in shipping

days


19



6



3



8



36



6



(3)





(3)



36


Venezuela remeasurement





















Comparable


$

101



$

104



$

55



$

68



$

328



$

84



$

29



$

33



$

(12)



$

462


Foreign currency impact





















Currency-Neutral Comparable


$

101



$

104



$

55



$

68



$

328



$

84



$

29



$

33



$

(12)



$

462


% change - 2015 vs. 2014:

















As Reported


5.8

%


(12.0)

%


5.0

%


(46.4)

%


(10.9)

%


(1.5)

%


(72.9)

%


27.9

%


51.5

%


90.9

%

Mark-to-market


%


%


%


%


%


%


%


%


65.7

%


103.8

%

Project K and cost reduction activities


10.8

%


(1.7)

%


(1.2)

%


(25.1)

%


(2.7)

%


(0.8)

%


(9.6)

%


54.5

%


(55.9)

%


(3.1)

%

Other costs impacting comparability


%


%


%


%


%


0.3

%


%


0.5

%


22.8

%


1.1

%

Integration and transaction costs


%


(0.2)

%


%


%


%


13.3

%


(5.1)

%


(5.0)

%


(0.3)

%


1.6

%

Acquisitions/divestitures


%


%


%


%


%


0.7

%


%


%


%


0.1

%

Differences in shipping days


(18.3)

%


(4.7)

%


(5.5)

%


(9.2)

%


(10.0)

%


(5.9)

%


4.4

%


0.7

%


16.4

%


(6.8)

%

Venezuela remeasurement


%


%


%


%


%


%


(14.9)

%


%


%


(0.9)

%

Comparable growth


13.3

%


(5.4)

%


11.7

%


(12.1)

%


1.8

%


(9.1)

%


(47.7)

%


(22.8)

%


2.8

%


(4.9)

%

Foreign currency impact


0.5

%


%


%


(5.0)

%


(0.9)

%


(4.6)

%


(93.9)

%


(9.6)

%


8.9

%


(7.7)

%

Currency-Neutral Comparable growth


12.8

%


(5.4)

%


11.7

%


(7.1)

%


2.7

%


(4.5)

%


46.2

%


(13.2)

%


(6.1)

%


2.8

%

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

 

Kellogg Company and Subsidiaries

Reconciliation of Non-GAAP Amounts - Reported Operating Profit to Currency-Neutral Comparable Operating Profit



Year ended January 2, 2016















(millions)


U.S.

Morning

Foods


U.S.

Snacks


U.S.

Specialty


North

America

Other


Total North

America


Europe


Latin

America


Asia

Pacific


Corporate


Kellogg

Consolidated

Reported


$

474



$

385



$

260



$

178



$

1,297



$

247



$

9



$

54



$

(516)



$

1,091


Mark-to-market


















(446)



(446)


Project K and cost reduction activities


(58)



(50)



(5)



(63)



(176)



(74)



(4)



(13)



(56)



(323)


Other costs impacting comparability




67







67











67


Integration and transaction costs












(11)



(3)



(14)



(2)



(30)


Acquisitions/divestitures












4









4


Differences in shipping

days





















Venezuela remeasurement














(119)





(1)



(120)


Comparable


$

532



$

368



$

265



$

241



$

1,406



$

328



$

135



$

81



$

(11)



$

1,939


Foreign currency impact


2







(15)



(13)



(29)



(72)



(13)



(5)



(132)


Currency-Neutral Comparable


$

530



$

368



$

265



$

256



$

1,419



$

357



$

207



$

94



$

(6)



$

2,071


Year ended January 3, 2015















(millions)


U.S.

Morning

Foods


U.S.

Snacks


U.S.

Specialty


North

America

Other


Total North

America


Europe


Latin

America


Asia

Pacific


Corporate


Kellogg

Consolidated

Reported


$

479



$

364



$

266



$

295



$

1,404



$

232



$

169



$

53



$

(834)



$

1,024


Mark-to-market


















(784)



(784)


Project K and cost reduction activities


(60)



(57)



(3)



(18)



(138)



(80)



(8)



(37)



(35)



(298)


Other costs impacting comparability


















(6)



(6)


Integration and transaction costs












(36)





(7)





(43)


Acquisitions/divestitures





















Differences in shipping

days


19



6



3



8



36



6



(3)





(3)



36


Venezuela remeasurement





















Comparable


$

520



$

415



$

266



$

305



$

1,506



$

342



$

180



$

97



$

(6)



$

2,119


Foreign currency impact





















Currency-Neutral Comparable


$

520



$

415



$

266



$

305



$

1,506



$

342



$

180



$

97



$

(6)



$

2,119


% change - 2015 vs. 2014:

















As Reported


(0.9)

%


5.9

%


(2.4)

%


(39.8)

%


(7.6)

%


6.7

%


(94.8)

%


1.7

%


38.1

%


6.6

%

Mark-to-market


%


%


%


%


%


%


%


%


78.5

%


21.6

%

Project K and cost reduction activities


0.4

%


2.6

%


(0.6)

%


(16.5)

%


(3.0)

%


3.7

%


(2.2)

%


26.6

%


(50.3)

%


(3.3)

%

Other costs impacting comparability


%


15.8

%


%


%


4.3

%


0.1

%


%


0.1

%


51.8

%


3.4

%

Integration and transaction costs


%


(0.1)

%


%


%


%


7.3

%


(1.4)

%


(9.1)

%


(10.0)

%


0.3

%

Acquisitions/divestitures


%


%


%


%


%


1.3

%


%


%


%


0.2

%

Differences in shipping days


(3.7)

%


(1.1)

%


(1.0)

%


(2.0)

%


(2.2)

%


(1.7)

%


0.2

%


0.3

%


50.2

%


(1.4)

%

Venezuela remeasurement


%


%


%


%


%


%


(66.5)

%


%


(15.1)

%


(5.7)

%

Comparable growth


2.4

%


(11.3)

%


(0.8)

%


(21.3)

%


(6.7)

%


(4.0)

%


(24.9)

%


(16.2)

%


(67.0)

%


(8.5)

%

Foreign currency impact


0.3

%


%


%


(5.2)

%


(0.9)

%


(8.3)

%


(40.3)

%


(12.5)

%


(62.9)

%


(6.2)

%

Currency-Neutral Comparable growth


2.1

%


(11.3)

%


(0.8)

%


(16.1)

%


(5.8)

%


4.3

%


15.4

%


(3.7)

%


(4.1)

%


(2.3)

%

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

 

Kellogg Company and Subsidiaries

Reconciliation of Non-GAAP Amounts - Reported Effective Tax Rate

to Currency-Neutral Comparable Effective Tax Rate





Quarter ended


Year ended



January 2,
 2016


January 3,
 2015


January 2,
 2016


January 3,
 2015

Reported Effective Tax Rate


60.7

%


39.1

%


20.6

%


22.6

%

Mark-to-market


38.0

%


12.1

%


(4.6)

%


(5.8)

%

Project K and cost reduction activities


(1.8)

%


0.5

%


(0.8)

%


0.2

%

Other costs impacting comparability


%


(0.1)

%


(0.9)

%


%

Integration and transaction costs


(0.5)

%


(0.1)

%


%


%

Acquisitions/divestitures


%


%


(0.2)

%


%

Differences in shipping days


%


0.2

%


%


%

Venezuela remeasurement


0.3

%


%


1.5

%


%

Comparable Effective Tax Rate


24.7

%


26.5

%


25.6

%


28.2

%

Foreign currency impact


0.5

%


%


0.7

%


%

Currency-Neutral Comparable Effective Tax Rate


24.2

%


26.5

%


24.9

%


28.2

%
























 

Significant items impacting comparability

Comparable and Currency-Neutral Comparable EPS
For all periods presented, Comparable and Currency-Neutral Comparable basic and diluted EPS are calculated using the same shares outstanding that are used for As Reported basic and diluted EPS.

Project K and cost reduction activities
During 2013, the Company announced Project K, a four-year efficiency and effectiveness program. The program is expected to generate a significant amount of savings that will be invested in key strategic areas of focus for the business. The Company  expects that this investment will drive future growth in revenues, gross margin, operating profit, and cash flow. The Company  recorded pre-tax charges related to this program of $68 million and $311 million for the quarter and year-to-date periods ended January 2, 2016, respectively.  The Company also recorded charges of $74 million and $298 million for the quarter and year-to-date periods ended January 3, 2015, respectively.

In 2015 we initiated the implementation of a zero-based budgeting (ZBB) program in our North America business. In support of the ZBB initiative, we incurred pre-tax charges of approximately $12 million in 2015.

Acquisitions and dispositions
In September 2015, the Company completed the acquisition of Mass Foods, Egypt's leading cereal company for $46 million, or $44 million net of cash and cash equivalents acquired.  The acquisition added $4 million in incremental net sales to our reported results in the European reportable segment for the quarter and year-to-date periods ended January 2, 2016.  The incremental operating profit for the quarter and year-to-date period ended January 2, 2016 was less then one million dollars.

In January 2015, the Company completed the acquisition of a majority interest in Bisco Misr, the number one packaged biscuits company in Egypt for $125 million, or $117 million net of cash and cash equivalents acquired.  The acquisition added $15 million and $54 million in incremental net sales to our reported results in the European reportable segment for the quarter and year-to-date periods ended January 2, 2016, respectively.  The acquisition added less than one million  and $4 million of incremental operating profit to our reported results for the quarter and year-to-date periods ended January 2, 2016, respectively.

During the quarter ended September 27, 2014, the Company entered into an agreement to sell our vegan and vegetarian canned-meat substitute business unit under the Loma Linda brand to Atlantic Natural Foods (ANF), LLC of Nashville, N.C.  The disposition negatively impacted reported net sales in the U.S. Specialty reportable segment by approximately $9 million for the year-to-date period ended January 3, 2015.

Integration and transaction costs
The Company has incurred integration costs related to the integration of the 2015 acquisition of Bisco Misr and the 2012 acquisition of Pringles as the Company moves these businesses into the Kellogg business model.  In addition, the Company  has incurred transaction costs for the September 2015 acquisition of Mass Foods and the September 2015 entry into a joint venture with Tolaram Africa.  The Company recorded pre-tax integration and transaction costs of $8 million and $30 million for the quarter and year-to-date periods ended January 2, 2016, respectively.  The Company recorded pre-tax integration charges of $18 million and $43 million for the quarter and year-to-date periods ended January 3, 2015, respectively.

Mark-to-market accounting for pension plans, commodities and certain foreign currency contracts
The Company recognizes mark-to-market adjustments for pension plans, commodity contracts, and certain foreign currency contracts as incurred.  Actuarial gains/losses for pension plans are recognized in the year they occur.  Changes between contract and market prices for commodities contracts and certain foreign currency contracts result in gains/losses that are recognized in the quarter they occur.  The Company recorded total pre-tax mark-to-market charges of $387 million and $446 million for the quarter and year-to-date periods ended January 2, 2016, respectively.  The Company recorded total pre-tax mark-to-market charges of $822 million and $784 million for the quarter and year-to-date periods ended January 3, 2015, respectively.  The pre-tax mark-to-market charges for pension plans were $393 million and $828 million for the quarters ended January 2, 2016 and January 3, 2015, respectively, and $471 million and $744 million for the year-to-date periods ended January 2, 2016 and January 3, 2015, respectively.

Other costs impacting comparability
During the quarter ended July 4, 201