XML 40 R19.htm IDEA: XBRL DOCUMENT
v3.24.0.1

STOCK COMPENSATION | 12 Months Ended
--- | ---
Dec. 30, 2023
Share-Based Payment Arrangement [Abstract] |
Stock Compensation [Text Block] | STOCK COMPENSATION The Company uses various equity-based compensation programs to provide long-term performance incentives for its global workforce. Currently, these incentives consist principally of stock options, restricted stock units and executive performance shares. The Company also sponsors a discounted stock purchase plan in the United States and matching-grant programs in several international locations. Additionally, the Company awards restricted stock to its o utside directors. These awards are administered through several plans, as described within this Note. Stock awards are granted to non-employee Directors in early May of each year and are automatically deferred pursuant to the Kellanova Grantor Trust for Non-Employee Directors (the "Grantor Trust") in the form of deferred shares of our common stock (or "DSUs"). Under the terms of the Grantor Trust, shares underlying vested stock awards are settled only upon a Director's termination of service on the Board. The 2022 Long-Term Incentive Plan (2022 Plan), approved by shareholders in April 2022, permits awards to employees and officers in the form of incentive and non-qualified stock options, performance units, restricted stock or restricted stock units, and stock appreciation rights. Through February 2022, the 2017 Long-Term Incentive Plan (2017) had a remaining 13.8 million authorized but unissued shares which was replaced by the 2022 Plan. The 2022 Plan authorizes the issuance of a total of 14.0 million shares. At December 30, 2023, there were 12.4 million remaining authorized, but unissued, shares under the 2022 Plan. In April 2020, the Amended and Restated Kellogg Company 2002 Employee Stock Purchase Plan was approved by shareholders, effective July 1, 2020. The plan is a tax-qualified employee stock purchase plan made available to substantially all U.S. employees, which allows participants to acquire Kellanova stock at a discounted price. The purpose of the plan is to encourage employees at all levels to purchase stock and become shareholders. Compensation expense for all types of equity-based programs and the related income tax benefit recognized were as follows:
(millions) |  | 2023 |  | 2022 |  | 2021 |
Pre-tax compensation expense |  | $ | 96 |  |  | $ | 100 |  |  | $ | 73 |  |
Related income tax benefit |  | $ | 25 |  |  | $ | 26 |  |  | $ | 19 |  |
As of December 30, 2023, total stock-based compensation cost related to non-vested awards not yet recognized was $108 million and the weighted-average period over which this amount is expected to be recognized was 2 years. Cash flows realized upon exercise or vesting of stock-based awards in the periods presented are included in the following table. Tax windfall (shortfall) realized upon exercise or vesting of stock-based awards generally represent the difference between the grant date fair value of an award and the taxable compensation of an award. Cash used by the Company to settle equity instruments granted under stock-based awards was not material.
(millions) |  | 2023 |  | 2022 |  | 2021
Total cash received from option exercises and similar instruments (a) |  | $ | 60 |  |  | $ | 277 |  |  | $ | 63 |
Tax windfall (shortfall) classified as cash flow from operating activities (a) |  | $ | 3 |  |  | $ | 3 |  |  | $ | (3) |
(a) Activities prior to the spin-off remain unadjusted to ensure consistency with historical reporting Shares used to satisfy stock-based awards are normally issued out of treasury stock, although management is authorized to issue new shares to the extent permitted by respective plan provisions. Refer to Note 7 for information on shares issued during the periods presented to employees and directors under various long-term incentive plans and share repurchases under the Company’s stock repurchase authorizations. The Company does not currently have a policy of repurchasing a specified number of shares issued under employee benefit programs during any particular time period. Performance Shares and Restricted Stock Units During the periods presented, stock-based awards consisted principally of performance shares and restricted stock units granted under the 2022 and 2017 Plans. In the first quarter of 2023, the Company granted performance share units to eligible employees, which entitle these employees to receive a specified number of shares of the Company's common stock upon vesting, as well as dividend equivalent shares. The number of shares earned could range between 0% and 200% of the target amount depending upon performance achieved over the three year performance period. The performance conditions of the award include net sales growth and cash flow related targets. Dividend equivalents accrue and vest in accordance with the underlying award. The 2023 target performance share unit currently corresponds to approximately 765,000 shares, with a grant-date fair value of $60 per share. In 2022, the Company granted performance shares to a limited number of senior level employees, which entitle these employees to receive a specified number of shares of the Company's common stock upon vesting, as well as dividend equivalent shares. The number of shares earned could range between 0% and 200% of the target amount depending upon performance achieved over the three year performance period. The performance conditions of the award include net sales growth and cash flow related targets. Dividend equivalents accrue and vest in accordance with the underlying award. The 2022-2024 EPP performance goals were established at the beginning of 2022 and did not contemplate the spin-off of WK Kellogg Co. The terms of the EPP provided for equitably adjusting the goals based on extraordinary events like a spin-off. The Company completed the spin-off of WK Kellogg Co on October 2, 2023. Adjustments were made to performance goals primarily to equitably adjust for the impact of the spin-off and the performance period ending on the date of the spin-off as well as account for the divestiture of the Company's business in Russia. In October 2023 the Board of Directors approved a payout of 140% to vest based on the holder's continued service with the Company through the original vesting period. In 2021, the Company granted performance shares to a limited number of senior level employees, which entitle these employees to receive a specified number of shares of the Company's common stock upon vesting, as well as dividend equivalent shares. The number of shares earned could range between 0% and 200% of the target amount depending upon performance achieved over the three year performance period. The performance conditions of the award include net sales growth and cash flow related targets. Dividend equivalents accrue and vest in accordance with the underlying award. The 2021-2023 EPP performance goals were established at the beginning of 2021 and did not contemplate the spin-off of WK Kellogg Co. The terms of the EPP provided for equitably adjusting the goals based on extraordinary events like a spin-off. The Company completed the spin-off of WK Kellogg Co on October 2, 2023. Adjustments were made to performance goals primarily to equitably adjust for the impact of the spin-off and the performance period ending on the date of the spin-off as well as account for the divestiture of the Company's business in Russia. In October 2023 the Board of Directors approved a payout of 165% to vest based on the holder's continued service with the Company through the original vesting period. Based on the market price of the Company’s common stock at year-end 2023, the maximum future value that could be awarded on the vesting date was $86 million for the 2023 award. The 2020 performance share award, payable in stock, was settled at 175% of target in February 2023 for a total dollar equivalent of $34 million. The Company also gr ants restricted stock units to eligible employees, typically with three-year cliff vesting earning dividend equivalent units. Dividend equivalents accrue and vest in accordance with the underlying award. Management estimates the fair value of restricted stock grants based on the market price of the underlying stock on the date of grant. A summary of restricted stock unit activity for the year ended December 30, 2023, is presented in the following table:
Employee restricted stock units |  | Shares (thousands) |  | Weighted-average grant-date fair value
Non-vested, beginning of year (a) |  | 1,661 |  |  | $ | 64 |
Granted |  | 572 |  |  | 68 |
Vested |  | (491) |  |  | 65 |
Forfeited |  | (359) |  |  | 65 |
Performance share conversion |  | 1,486 |  |  | 63 |
Awards transferred to WK Kellogg Co |  | (529) |  |  | 65 |
Adjustment for spin-off (b) |  | 843 |  |  | — |
Non-vested, end of year |  | 3,183 |  |  | $ | 58 |
(a) Activities prior to the spin-off remain unadjusted to ensure consistency with historical reporting. (b) In connection with the spin-off of WK Kellogg Co, the modification of restricted stock units resulted in incremental expense totaling approximately $11 million to be amortized over the remaining vesting period of the award. Additionally, restricted stock unit activity for 2022 and 2021 is presented in the following table:
Employee restricted stock units (a) |  | 2022 |  | 2021
Shares (in thousands): |  |  |  |
Non-vested, beginning of year |  | 1,786 |  |  | 1,736 |
Granted |  | 709 |  |  | 727 |
Vested |  | (619) |  |  | (489) |
Forfeited |  | (215) |  |  | (188) |
Non-vested, end of year |  | 1,661 |  |  | 1,786 |
Weighted-average exercise price: |  |  |  |
Non-vested, beginning of year |  | $ | 60 |  |  | $ | 61 |
Granted |  | 67 |  |  | 58 |
Vested |  | 57 |  |  | 63 |
Forfeited |  | 62 |  |  | 60 |
Non-vested, end of year |  | $ | 64 |  |  | $ | 60 |
(a) Activities prior to the spin-off remain unadjusted to ensure consistency with historical reporting The total fair value of restricted stock units vesting in the periods presented was (in millions): 2023–$33; 2022–$41; 2021–$29. Stock options During 2021, non-qualified stock options were granted to eligible employees under the 2017 Plans with exercise prices equal to the fair market value of the Company’s stock on the grant date, a contractual term of ten years, and a three-year graded vesting period. Since 2021, the Company has not granted non-qualified stock options to eligible employees. The non-qualified stock option grant was replaced with performance shares for the population of Long-Term Incentive grantees. Management estimates the fair value of each annual stock option award on the date of grant using a lattice-based option valuation model. Composite assumptions are presented in the following table. Weighted-average values are disclosed for certain inputs which incorporate a range of assumptions. Expected volatilities are based principally on historical volatility of the Company’s stock, and to a lesser extent, on implied volatilities from traded options on the Company’s stock. Historical volatility corresponds to the contractual term of the options granted. The Company uses historical data to estimate option exercise and employee termination within the valuation models; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted represents the period of time that options granted are expected to be outstanding; the weighted-average expected term for all employee groups is presented in the following table. The risk-free rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of grant.
Stock option valuation model assumptions for grants within the year ended: |  | 2021 |  |  |
Weighted-average expected volatility |  | 20.00 | % |  |  |
Weighted-average expected term (years) |  | 6.7 |  |  |
Weighted-average risk-free interest rate |  | 0.96 | % |  |  |
Dividend yield |  | 3.90 | % |  |  |
Weighted-average fair value of options granted |  | $ | 6.39 |  |  |  |
A summary of option activity for the year ended December 30, 2023 is presented in the following table:
Employee and director stock options |  | Shares (millions) |  | Weighted- average exercise price |  | Weighted- average remaining contractual term (yrs.) |  | Aggregate intrinsic value (millions)
Outstanding, beginning of year (a) |  | 10 |  |  | $ | 65 |  |  |  |  |
Granted |  | — |  |  | — |  |  |  |  |
Exercised |  | (1) |  |  | 59 |  |  |  |  |
Forfeitures and expirations |  | (1) |  |  | 60 |  |  |  |  |
Awards transferred to WK Kellogg Co |  | (1) |  |  | 66 |  |  |  |  |
Adjustment for spin-off (b) |  | 2 |  |  |  |  |  |  |
Outstanding, end of year |  | 9 |  |  | 55 |  |  | 4.5 |  | $ | 15 |
Exercisable, end of year |  | 8 |  |  | $ | 59 |  |  | 4.3 |  | $ | 12 |
(a) Activities prior to the spin-off remain unadjusted to ensure consistency with historical reporting. (b) In connection with the spin-off of WK Kellogg Co, the modification of stock options resulted in incremental expense totaling approximately $10 million, of which $9 million was related to vested awards and was recognized immediately. The remaining expense will be amortized over the vesting period of the award. Additionally, option activity for the comparable prior year periods is presented in the following table:
(millions, except per share data) (a) |  | 2022 |  | 2021
Outstanding, beginning of year |  | 15 |  |  | 14 |
Granted |  | — |  |  | 3 |
Exercised |  | (4) |  |  | (1) |
Forfeitures and expirations |  | (1) |  |  | (1) |
Outstanding, end of year |  | 10 |  |  | 15 |
Exercisable, end of year |  | 8 |  |  | 10 |
Weighted-average exercise price: |  |  |  |
Outstanding, beginning of year |  | $ | 64 |  |  | $ | 65 |
Granted |  | — |  |  | 58 |
Exercised |  | 61 |  |  | 56 |
Forfeitures and expirations |  | 63 |  |  | 66 |
Outstanding, end of year |  | $ | 65 |  |  | $ | 64 |
Exercisable, end of year |  | $ | 67 |  |  | $ | 66 |
(a) Activities prior to the spin-off remain unadjusted to ensure consistency with historical reporting. The total intrinsic value of options exercised during the periods presented was (in millions): 2023–$5; 2022–$44; 2021–$6.

X
- Definition The entire disclosure for share-based payment arrangement. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 718 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a)(1) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480429/718-10-50-2 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 718 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//718/tableOfContent Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 718 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480429/718-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 718 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h)(2) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480429/718-10-50-2 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 718 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h)(2)(i) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480429/718-10-50-2 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 718 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (l) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480429/718-10-50-2 + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsSharebasedPaymentsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration