Spin-Off and Corporate Structure - The Spin-Off of WK Kellogg Co from Kellanova was completed on October 2, 2023, with Kellanova distributing one share of WK Kellogg Co common stock for every four shares of Kellanova common stock[17]. - Kellanova's North America cereal business was separated and spun off into WK Kellogg Co, with the distribution of one share of WK Kellogg Co common stock for every four shares of Kellanova common stock on October 2, 2023[17]. - WK Kellogg Co entered into several agreements with Kellanova, including a Transition Services Agreement to ensure an orderly transition post-Spin Off[19]. Product Portfolio and Market Position - WK Kellogg Co's principal products include cereals categorized into taste, wellness, and balance, with leading brands such as Frosted Flakes, Special K, and Froot Loops[20]. - The company has a diverse portfolio of cereals aimed at enhancing consumer lives, supported by over a century of institutional knowledge[16]. - The company has a significant market position in the North American cereal industry, supported by a diversified portfolio of iconic brands[32]. - The company has a diversified portfolio of cereals across taste, wellness, and balance sub-categories, appealing to a wide demographic[16]. Supply Chain and Raw Materials - The company has experienced supply chain disruptions leading to increased prices of raw materials, packaging, and labor, impacting profitability[22]. - The company relies on agricultural commodities such as corn, wheat, and sugar as principal raw materials, which are subject to price fluctuations due to various market conditions[21]. - The principal raw materials include agricultural commodities such as corn, wheat, and sugar, with costs subject to fluctuations due to various external factors[21]. - The company utilizes derivative financial instruments to hedge against commodity price risks[22]. Competition and Market Dynamics - The company faces intense competition from both branded and private label products, competing on factors such as product quality, price, and innovation[32]. - The company faces intense competition from both branded and private label products, necessitating continuous innovation and marketing efforts[32]. - WK Kellogg Co's future results may be affected by factors such as supply chain disruptions, inflation, and competition in the retail environment[14]. Financial Performance and Customer Base - In 2023, Wal-Mart Stores, Inc. accounted for approximately 26% of combined net sales, with the top five customers collectively representing about 47% of net sales[30]. - Kellanova's largest customer, Wal-Mart Stores, Inc., accounted for approximately 26% of combined net sales during 2023, with the top five customers collectively representing about 47% of net sales[30]. Research and Development - Research and development expenditures for the year ended December 30, 2023, were approximately $25 million[33]. - The company is actively involved in research to expand existing products and develop new food products at the W. K. Kellogg Institute for Food and Nutrition Research[33]. Employee Engagement and Corporate Culture - The company employs approximately 3,150 employees as of December 30, 2023, and focuses on employee engagement and well-being[38]. - The company emphasizes employee engagement through frequent communication and a global opinion survey[38]. - The company offers a competitive benefits package that includes defined benefit pension plans and defined contribution retirement plans[38]. - The company is committed to evolving its programs to meet the total well-being needs of its employees[38]. - The company provides flexible work arrangements to promote work/life integration[38]. - The company is committed to fostering a culture of equity, diversity, inclusion, and belonging in the workplace[38]. - The company invests in training and development programs for leadership and technical capabilities[38]. Management Team - The Chief Executive Officer and Chairman of the Board is Gary Pilnick, appointed effective upon the completion of the Spin-Off[40]. - The Chief Financial Officer is David McKinstray, who has significant experience in global roles across risk management and corporate financial planning[45]. - The Chief Growth Officer is Doug VanDeVelde, who has held various leadership roles in marketing for over 25 years[46]. Regulatory and Compliance Matters - There are no current regulatory matters expected to materially impact the company's financial performance, although future regulations could pose risks[35]. - The company maintains internal controls to mitigate the risk of non-compliance with various regulations[34].

• Grow EBITDA Our Margin Opportunity Opportunity to leverage low-cost platforms and processes Significant cost and efficiency disparity within the current network FACTORY EXPENSE PER KILO HIGHEST COST FACILITY ~50%2 ~20%2 LOWEST COST FACILITY LEAST EFFICIENT FACILITY MOST EFFICIENT FACILITY | 49 1) As measured by Overall Equipment Effectiveness (OEE) 2) These are management estimates OPERATING EFFICIENCY1 Modernizing our Supply Chain | 50 • Automation • Digital Capabilities • New Manufacturing Technology | ...

WK Kellogg Co (NYSE:KLG) CAGNY 2024 Conference Summary Company Overview - WK Kellogg Co is a $2.7 billion revenue business, a leading player in the cereal category in the US, Canada, and the Caribbean [6][10] - The company operates with approximately 3,000 employees and has a dedicated sales force [6][10] - The leadership team has over 180 years of combined Kellogg experience [6] Core Industry Insights - The cereal category is valued at over $10 billion in North America, being the number one breakfast choice for children and the second for adults [10] - Cereal drives 50 million personal decisions weekly, with basket sizes increasing by nearly 150% when cereal is included [11] - Cereal is low in fat and calories, nutrient-dense, and represents only 5% of added sugar in the average diet [12][13] Strategic Focus and Execution - The company emphasizes a focused strategy on cereal, integrating marketing, sales, and supply chain functions to enhance visibility and decision-making [14][15] - The first strategic horizon focuses on optimizing the existing business, targeting a 500 basis point margin expansion from a 9% EBITDA base [9][54] - The second horizon involves exploring inorganic growth opportunities such as M&A and joint ventures [10] Marketing and Sales Strategy - The integrated commercial plan aims to enhance demand creation and in-store activation, focusing solely on cereal [23][25] - The CORE 6 brands represent approximately 70% of the business, with a strong emphasis on brand marketing and innovation [23][24] - The sales force is dedicated exclusively to cereal, allowing for deeper customer engagement and better execution [36][37] Supply Chain Modernization - The supply chain modernization plan includes a capital investment of $450 million to $500 million over the next two years [46] - The company aims to consolidate manufacturing networks to improve efficiency and reduce costs [44][45] - Recent improvements in customer service have been noted, achieving the highest level since March 2020 [43] Financial Outlook - The company targets a stable top line and significant EBITDA growth, with a disciplined approach to capital allocation [52][56] - The goal is to increase cash returns to shareholders as margins improve, targeting a debt level of approximately 2.5 times EBITDA [56] Cultural and Community Engagement - The "Feeding Happiness" initiative aims to promote healthier eating and community engagement through programs like "Mission Tiger," which supports youth sports [20][38] - The company emphasizes a strong culture driven by employee engagement and a commitment to sustainability [19][20] Key Takeaways - WK Kellogg Co is positioned to leverage its heritage and focus on cereal to drive growth and profitability [4][21] - The integration of functions and a dedicated sales force are seen as critical to unlocking potential in the cereal category [15][36] - The company is committed to modernizing its supply chain and enhancing operational efficiency to support its financial goals [44][52]

[PART I — Financial Information](index=3&type=section&id=PART%20I%20%E2%80%94%20Financial%20Information) [Item 1: Financial Statements](index=3&type=section&id=Item%201%3A%20Financial%20Statements) This section presents WK Kellogg Co's unaudited combined financial statements and related notes, detailing financial position, performance, and cash flows post-spin-off [Unaudited Combined Balance Sheet](index=3&type=section&id=Unaudited%20Combined%20Balance%20Sheet) Total assets increased to **$1,866 million** from **$1,436 million**, while total liabilities rose to **$1,670 million** from **$749 million**, primarily due to new debt and postretirement plan assumptions Combined Balance Sheet Summary (Millions USD) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$1,866** | **$1,436** | | Total current assets | $739 | $670 | | Property, net | $721 | $645 | | Postretirement plan assets | $270 | - | | **Total Liabilities** | **$1,670** | **$749** | | Total current liabilities | $931 | 666 | | Long-term debt | $487 | - | | Pension liability | $130 | - | | **Total Equity** | **$196** | **$687** | [Unaudited Combined Statement of Income](index=4&type=section&id=Unaudited%20Combined%20Statement%20of%20Income) Q3 2023 net sales slightly decreased to **$692 million**, but net income rose to **$42 million**, while year-to-date net sales increased to **$2,112 million** but net income declined to **$95 million** due to spin-off costs Combined Statement of Income Summary (Millions USD) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $692 | $705 | $2,112 | $2,018 | | Operating profit | $17 | $7 | $71 | $83 | | Net income | $42 | $23 | $95 | $127 | | Basic and diluted EPS | $0.49 | $0.27 | $1.10 | $1.48 | [Unaudited Combined Statement of Cash Flows](index=7&type=section&id=Unaudited%20Combined%20Statement%20of%20Cash%20Flows) Year-to-date operating cash flow significantly increased to **$184 million**, while investing activities used **$89 million** and financing activities used **$31 million**, reflecting debt and a large dividend Combined Statement of Cash Flows Summary (Millions USD) | Activity | YTD Sep 30, 2023 | YTD Oct 1, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $184 | $53 | | Net cash used in investing activities | $(89) | $(38) | | Net cash used in financing activities | $(31) | $(15) | | **Increase in cash and cash equivalents** | **$64** | **-** | [Notes to Unaudited Combined Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Combined%20Financial%20Statements) These notes provide crucial context on the spin-off from Kellanova, detailing accounting policies, new debt facilities, retirement benefit obligations, related-party transactions, and separation costs - WK Kellogg Co spun off from Kellanova on October 2, 2023, trading as **"KLG"**, with financial statements prepared on a carve-out basis including allocated corporate expenses[22](index=22&type=chunk)[23](index=23&type=chunk)[27](index=27&type=chunk) - The company assumed pension and postretirement plan assets and liabilities, recording a **$130 million** pension liability and **$270 million** in postretirement plan assets as of September 30, 2023[51](index=51&type=chunk) - A new Credit Agreement was established on September 12, 2023, including a **$500 million** term loan and a **$350 million** revolving credit facility, with total borrowings at **$664 million** as of September 30, 2023[56](index=56&type=chunk)[64](index=64&type=chunk) - A **$663 million** dividend was paid to Kellanova on September 29, 2023, funded by new debt financing[39](index=39&type=chunk)[72](index=72&type=chunk) - Significant spin-off costs totaled **$28 million** for the quarter and **$89 million** year-to-date through September 30, 2023[84](index=84&type=chunk) [Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202%3A%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's standalone operations, financial performance, liquidity, and capital resources, addressing challenges like supply chain disruptions, inflation, and market competition - Key business challenges include ongoing supply chain disruptions, inflationary pressures on raw materials and labor, and intense competition in the ready-to-eat cereal category[106](index=106&type=chunk)[107](index=107&type=chunk)[111](index=111&type=chunk) - The company's strategy to combat inflation involves productivity initiatives and revenue growth management actions, including price increases, to offset rising input costs[107](index=107&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Q3 2023 net sales decreased **1.9%** to **$692 million** despite improved gross margin, while year-to-date net sales increased **4.6%** but net income declined **25%** due to spin-off costs Net Sales Performance | Period | Net Sales Change | Volume Change | Pricing/Mix Change | | :--- | :--- | :--- | :--- | | Q3 2023 vs Q3 2022 | (1.9)% | (13.4)% | 11.5% | | YTD 2023 vs YTD 2022 | 4.6% | (9.7)% | 14.3% | Gross Margin Performance | Period | Reported Gross Margin | Adjusted Gross Margin | | :--- | :--- | :--- | | Q3 2023 | 28.4% | 27.9% | | Q3 2022 | 24.7% | 25.0% | | **Change (bps)** | **+370** | **+290** | EBITDA Reconciliation (Millions USD) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Reported net income | $42 | $23 | $95 | $127 | | EBITDA | $72 | $43 | $174 | $210 | | Adjusted EBITDA | $55 | $32 | $215 | $153 | - SG&A expense increased **30.1%** year-to-date, driven by **$61 million** in incremental separation costs and a **$49 million** increase in advertising and promotion expense[132](index=132&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) The company now manages its own liquidity, securing a new credit facility with **$664 million** in borrowings, and reported strong year-to-date operating cash flow of **$184 million**, while declaring a **$0.16** per share dividend - The company now relies on its own cash flow and credit facilities for liquidity, no longer participating in Kellanova's centralized cash management[139](index=139&type=chunk) - As of September 30, 2023, the company had **$664 million** in borrowings under its new credit facility, with an additional **$436 million** available[140](index=140&type=chunk) - The Board of Directors declared a dividend of **$0.16** per common share, payable on December 15, 2023[94](index=94&type=chunk)[140](index=140&type=chunk) Summary of Cash Flows (YTD, Millions USD) | Activity | Sep 30, 2023 | Oct 1, 2022 | | :--- | :--- | :--- | | Operating activities | $184 | $53 | | Investing activities | $(89) | $(38) | | Financing activities | $(31) | $(15) | [Item 3: Quantitative and Qualitative Disclosures about Market Risk](index=31&type=section&id=Item%203%3A%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks from foreign currency, commodity prices, and interest rates, with primary exposure to variable-rate debt, where a **125 basis point** rate change would have an immaterial impact - The company is exposed to interest rate risk from its new variable-rate Credit Facility, which is based on SOFR plus a margin[161](index=161&type=chunk) - A hypothetical **1.25% (125 basis point)** change in interest rates would have an impact of less than **$1 million** on pre-tax income for the quarter[161](index=161&type=chunk) [Item 4: Controls and Procedures](index=31&type=section&id=Item%204%3A%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal controls over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[162](index=162&type=chunk) - No material changes were made to the company's internal controls over financial reporting during the third quarter of 2023[163](index=163&type=chunk) [PART II — Other Information](index=32&type=section&id=PART%20II%20%E2%80%94%20Other%20Information) [Item 1A: Risk Factors](index=32&type=section&id=Item%201A%3A%20Risk%20Factors) No material changes were reported to the company's risk factors from those previously disclosed in its Form 10 Registration Statement - No material changes were reported to the risk factors previously disclosed in the company's Form 10 Registration Statement[166](index=166&type=chunk) [Item 6: Exhibits](index=33&type=section&id=Item%206%3A%20Exhibits) This section lists exhibits filed with the Form 10-Q, including key agreements like the Separation and Distribution Agreement, Credit Facility, and CEO/CFO certifications - Key agreements filed as exhibits include the Separation and Distribution Agreement, Tax Matters Agreement, and the new Credit Facility agreement, defining the company's standalone structure and obligations[170](index=170&type=chunk)[171](index=171&type=chunk)