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DISCONTINUED OPERATIONS | 12 Months Ended
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Dec. 30, 2023
Discontinued Operations and Disposal Groups [Abstract] |
Disposal Groups, Including Discontinued Operations, Disclosure | DISCONTINUED OPERATIONS As disclosed in Note 1, 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. 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. In accordance with applicable accounting guidance, the results of WK Kellogg Co are presented as discontinued operations in the consolidated statements of operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. Further, the Company reclassified the assets and liabilities of WK Kellogg Co as assets and liabilities of discontinued operations in the consolidated balance sheet as of December 31, 2022. The consolidated statements of cash flows are presented on a consolidated basis for both continuing operations and discontinued operations. The following table presents key components of “Income from discontinued operations, net of income taxes” for the fiscal years ended December 30, 2023, December 31, 2022, and January 1, 2022:
(millions) | 2023 | 2022 | 2021
Net sales | $ | 2,085 |  | $ | 2,662 |  | $ | 2,434 |
Cost of goods sold | $ | 1,387 |  | $ | 1,858 |  | $ | 1,692 |
Selling, general and administrative expense | $ | 479 |  | $ | 381 |  | $ | 373 |
Operating profit | $ | 219 |  | $ | 423 |  | $ | 369 |
Interest expense | $ | 26 |  | $ | 17 |  | $ | 18 |
Other income (expense), net | $ | 54 |  | $ | (111) |  | $ | 162 |
Income from discontinued operations before income taxes | $ | 247 |  | $ | 295 |  | $ | 513 |
Income taxes | $ | 71 |  | $ | 64 |  | $ | 121 |
Net income from discontinued operations, net of tax | $ | 176 |  | $ | 231 |  | $ | 392 |
The following table presents assets and liabilities that are classified as discontinued operations on the consolidated balance sheet as of December 31, 2022:
(millions) |
Cash and cash equivalents | $ | — |
Accounts receivable, net | $ | 204 |
Inventories | $ | 429 |
Other current assets | $ | 5 |
Total current assets of discontinued operations | $ | 638 |
Property, net | $ | 699 |
Operating lease right-of-use assets | $ | 7 |
Goodwill | $ | 305 |
Other intangibles | $ | 57 |
Other assets | $ | 210 |
Total assets of discontinued operations | $ | 1,916 |
Accounts payable | $ | 405 |
Current operating lease liabilities | $ | 3 |
Accrued advertising and promotion | $ | 57 |
Accrued salaries and wages | $ | 52 |
Other current liabilities | $ | 31 |
Total current liabilities of discontinued operations | $ | 548 |
Operating lease liabilities | $ | 4 |
Deferred income taxes | $ | 53 |
Pension liability | $ | 116 |
Other non-current liabilities | $ | 10 |
Total liabilities of discontinued operations | $ | 731 |
The following table presents significant cash flow items from discontinued operations for the fiscal years ended December 30, 2023, December 31, 2022, and January 1, 2022:
(millions) | 2023 | 2022 | 2021
Depreciation and amortization | $ | 52 |  | $ | 74 |  | $ | 72 |
Additions to properties | $ | 107 |  | $ | 87 |  | $ | 90 |
Postretirement benefit plan expense (benefit) | $ | (53) |  | $ | 123 |  | $ | (143) |
On September 29, 2023, in connection with the planned separation, WK Kellogg Co entered into a Credit Agreement (the “Credit Agreement”) and borrowed $664 million under the term loan and revolving credit facility under the Credit Agreement. Approximately $663 million of these borrowings was paid by WK Kellogg Co to Kellanova in the form of a dividend. Pursuant to the conditions of the private letter ruling from the Internal Revenue Service, Kellanova used the proceeds from the dividend, along with cash on hand to repay outstanding commercial paper and the 2.65% Senior Notes due 2023, which had an outstanding principal balance of $550 million. In a pro rata spin-off of consolidated subsidiaries, the distribution of the assets and liabilities are recognized through equity instead of net income. Accordingly, Kellanova has recognized the distribution of net assets to WK Kellogg Co in retained earnings. Following the completion of the separation on October 2, 2023, the term loan and revolving credit facility under the Credit Agreement are no longer obligations of Kellanova. In connection with the separation, WK Kellogg Co entered into several agreements with Kellanova that govern the relationship of the parties following the spin-off including a Separation and Distribution Agreement, a Manufacturing and Supply Agreement (“Supply Agreement”), a Tax Matters Agreement, Employee Matters Agreement, Transition Services Agreement (“TSA”), and various lease agreements. Pursuant to the TSA, both Kellanova and WK Kellogg Co agree to provide certain services to each other, on an interim, transitional basis from and after the separation and the distribution for an initial duration of two years following the spin-off. The TSA covers various services such as supply chain, IT, commercial, sales, Finance, HR, R&D and other Corporate. The remuneration to be paid for such services is generally intended to allow the company providing the services to recover all of its costs and expenses of providing such services. The costs and reimbursements related to services provided by Kellanova under the TSA are recorded in continuing operations with the consolidated statement of operations. During 2023 Kellanova recorded approximately $52 million of cost reimbursements related to the TSA, of which $37 million is recognized in COGS and $15 million in SGA in the Consolidated Statement of Income. These reimbursements are a direct offset within the consolidated statement of income to the costs incurred related to providing services under the TSA. Pursuant to the Supply Agreement, Kellanova will continue to supply certain inventory to WKKC for a period of up to three years following the spin-off. Net sales of $18 million and cost of sales of $16 million were recognized in 2023 following the spin-off related to the Supply Agreement. Prior to the spin-off, such transactions were eliminated in the consolidated financial statements as intercompany transactions.

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