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DISCONTINUED OPERATIONS (Notes) | 3 Months Ended
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Sep. 28, 2024
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued operations | DISCONTINUED OPERATIONS During the fourth quarter of 2023, the Company completed the separation of its North America cereal business resulting in two independent companies, Kellanova and WK Kellogg Co. In accordance with applicable accounting guidance, the results of WK Kellogg Co are presented as discontinued operations in the Consolidated Statements of Income and, as such, have been excluded from both continuing operations and segment results for all periods presented. 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 quarter and year-to-date period ended September 30, 2023:
(millions) | Quarter-ended | Year-to-date period ended |
Net sales | $ | 684 |  | $ | 2,085 |  |
Cost of goods sold | 451 |  | 1,387 |  |
Selling, general and administrative expense | 165 |  | 444 |  |
Operating profit | $ | 68 |  | $ | 254 |  |
Interest expense | 8 |  | 27 |  |
Other income (expense), net | 38 |  | 55 |  |
Income from discontinued operations before income taxes | $ | 98 |  | $ | 282 |  |
Income taxes | 26 |  | 78 |  |
Net income from discontinued operations, net of tax | $ | 72 |  | $ | 204 |  |
The following table presents significant cash flow items from discontinued operations for the year-to-date period ended September 30, 2023:
(millions) |  |  |
Depreciation and amortization | $ | 52 |  |  |
Additions to properties | $ | 107 |  |  |
Postretirement benefit plan expense (benefit) | $ | (53) |  |  |
In connection with the separation, WK Kellogg Co ("WKKC") 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 agreed to provide certain services to each other, on an interim, transitional basis from and after the separation and the distribution for a duration of up to 2 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 within the Consolidated Statement of Income. Kellanova recorded approximate ly $37 million and $128 million of cost reimbursements related to the TSA for the quarter and year-to-date period ended September 28, 2024, respectively, of which $22 million and $84 million is recognized in cost of goods sold (COGS), respectively, and $15 million and $44 million in selling, general, and administrative expense (SGA), respectively, 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 3 years following the spin-off. During the quarter and year-to-date period ended September 28, 2024, the Company recognized net sales to WKKC of $9 million and $35 million, respectively, and cost of sales of $7 million and $30 million, respectively.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205-20/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 360 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/360/tableOfContent + Details
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