Simon Burton - Executive Officer of Snacks business unit John A. Bryant - Chief Executive Officer, President and Director Ronald L. Dissinger - Chief Financial Officer and Senior Vice President

Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division David Palmer - UBS Investment Bank, Research Division Andrew Lazar - Barclays Capital, Research Division Eric R. Katzman - Deutsche Bank AG, Research Division Kenneth Goldman - JP Morgan Chase & Co, Research Division Cornell Burnette Jonathan P. Feeney - Janney Montgomery Scott LLC, Research Division Scott Andrew Mushkin - Jefferies & Company, Inc., Research Division Christopher Growe - Stifel, Nicolaus & Co., Inc., Research Division Robert Dickerson - Consumer Edge Research, LLC Robert Moskow - Crédit Suisse AG, Research Division Matthew C. Grainger - Morgan Stanley, Research Division

Good day, ladies and gentlemen, and welcome to the Kellogg Company First Quarter 2012 Earnings Call. [Operator Instructions] At this time, I'll turn the call over to Simon Burton, Kellogg Company Vice President of Investor Relations. Mr. Burton, you may begin your conference.

Thanks, Hewey. Good morning, and thank you, everyone, for joining us today for a review of our first quarter 2012 results. I'm joined here by John Bryant, our President and CEO; and Ron Dissinger, our Chief Financial Officer. The press release and slides that support our remarks this morning are posted on our website at www.kelloggcompany.com. As you are aware, certain statements today, such as projections for Kellogg Company's future performance, including earnings per share, net sales, margin, operating profit, interest expense, tax rate, cash flow, brand building, upfront costs, investments and inflation are forward-looking statements. Actual results could be materially different from those projected. For further information concerning factors that could cause these results to differ, please refer to the second slide of this presentation, as well as to our public SEC filings. As a reminder, a replay of today's conference call will be available by phone through Monday, April 30, and the call will also be available via webcast, which will be archived for at least 90 days. Now I'll turn it over to John. John A. Bryant: Thank you, Simon, and thank you, everyone, for joining us this morning. We posted lower-than-expected results in the first quarter, in what proved to be a difficult operating environment. In fact, as you have seen in the data, volume growth across the industry and across most categories in the U.S. was challenging in the quarter. The results we announced on Monday were obviously disappointing. However, we have recognized over the years that setting realistic goals is an important driver of the success of our business. Given the difficult start to the year, we have revised our growth expectations for 2012. We believe that 2% to 3% sales growth for the year is a pragmatic goal and is one that allows us to follow our long-term model and invest in future growth. Lowering guidance is never easy, but it makes it possible for us to remain committed to our operating principles. As you'll remember from the fourth quarter call, we anticipated a continued difficult environment in specific categories and geographies throughout the year. This was certainly the case in Europe. We will discuss this in more detail later, but Europe's weak performance accounted for the majority of the impact on the quarter. As a result of this and the early weakness in the U.S., total internal revenue growth for the quarter was approximately flat, lower than we originally expected. It's also important to note that while we've adjusted our expectations for full year revenue growth because of weaker-than-expected revenue performance in the first quarter, we've adjusted our expectations for operating profit and earnings to allow us to continue to invest in the future growth of the business, while also absorbing the impact of the first quarter. Obviously, the timing of this year's delivery and even the shape will likely change, given the first quarter's results and the pending acquisition of Pringles that we announced in February. Also, as we told you last quarter, we still see 2012 as a continuation of the transition we began in 2011. As I've said, we remain committed to driving future growth and plan to invest in the business. As you might imagine however, the inclusion of Pringles will also change the timing and even the specifics of this investment. The planning for the integration of the Pringles business remains on track. It's still relatively early, but we're making good progress. We still expect to close the transaction around or before the middle of the year, and look forward to the benefits that will accrue from the combination of these 2 fantastic businesses. And now, if you'll turn to Slide 4, you'll see some more detail regarding the progress we've made with the planning of the integration. Both Kellogg and P&G have transition planning teams in place. We've evaluated the integration process, we've highlighted the milestones we need to reach and when we need to reach them, and we have a plan in place that will enable us to achieve our goals. There's been a lot of work on both sides, but things are progressing well. The financing of the deal is also going well. We've had good support from the banks, and we expect a good reception from the market. And as you might imagine, we remain very excited about the strategic rationale of this combination. As we discussed when we announced the transaction, the growth potential we see and the international scale that Pringles provides are very important to us. In addition, while we didn't build any synergies from product expansion into the financials of the deal, we do believe that there is the potential for us to recognize a meaningful amount over the years. Obviously, we'll give you more detail on future calls. And finally, Slide 5 gives an update on our supply chain initiative. As you all know, we increased the level of our investment by $100 million in 2011. We will, of course, look for ways to reduce this amount, but we remain committed to continually improving the entire supply chain organization. We continue to make very good progress, and as we've discussed previously, are implementing Kellogg best practices across our North American network. The supply chain organization is focused on producing great food, improving customer service, continuously improving both people and food safety, productivity enhancements and executing our strategy while delivering the financial results. And we continue to make considerable investment in facilities and our people. This includes increasing the amount of training and improving its efficacy. This investment in our processes and systems is driving increased engagement, development, and improved results and efficiencies. I'm proud of the hard work undertaken by the whole organization and the improvements we have made. This is an ongoing process and we're making good progress. And now I'll turn it over to Ron for a review of our financial highlights. Ronald L. Dissinger: Thanks, John, and good morning. If you'll turn to Slide 6, you'll see our quarterly financial summary. We posted reported revenue growth that was down approximately 1% in the quarter, on top of 5% growth in the first quarter of last year. Internal sales were approximately flat, on top of 3% growth last year. Internal operating profit decreased by 6% in the quarter. The decline in profit is driven by higher commodity cost and weakness in our European business. In addition, operating profit was also negatively impacted by the shape of the investment in supply chain. We mentioned in our guidance that commodity inflation was more front-half-weighted and supply chain investments would be made across the year. Reported earnings per share were unchanged in the first quarter, in line with our expectations. It includes some below-the-line favorability. Slide 7 details the components of sales growth in the first quarter. As I mentioned, reported sales decreased by 1% and internal sales were approximately flat, including strong price and mix of 4.4%. Tonnage declined by 4.5%, as a result of the weakness in Europe and in U.S. Morning Foods. We continue to expect that volume will be under pressure this year, but that it will improve as we progress through the year. Finally, currency decreased overall growth by approximately 1 point. Slide 8 shows our gross profit performance for the quarter. Gross profit for the quarter was $1.4 billion and gross margin declined by 90 basis points to 39.9%. As we mentioned last quarter, commodity inflation and a more evenly balanced investment in our supply chain would have a meaningful impact on this quarter's results. These 2 factors contributed equally to our decline in gross margin. Slide 9 shows the progression of our investment in brand building in recent quarters. Investment declined in the first quarter, although we were lapping a significant increase of 10% in the first quarter of 2011. So it's partially an issue of comps and timing. We have replanned our investment in Europe because we weren't seeing the returns we wanted in Q1. In addition, Europe invests a significant percentage of sales in brand building and although we've decreased this level for 2012, we're still investing more in the region than the company average on a percent-of-sales basis. For the total company, we still expect to increase brand building at a rate equal to or greater than sales growth for the full year. Slide 10 shows our internal operating profit performance for each of the businesses by area and the company as a whole. Operating profit decreased by 6% in the quarter, with the decline being driven primarily by higher commodity costs, weak results in Europe and increased supply chain investments. North America's internal operating profit decreased by approximately 5% in the first quarter. The impact of commodity cost inflation on this business was significant, and the effect of the timing of the supply chain investment is primarily a North American issue. Europe's internal operating profit declined by 20% in the quarter due to the lower sales and the continued difficult operating environment in certain parts of the region. We have issues that we are addressing in this region and though the improvement will take some time, we're optimistic that we're taking the right actions to improve performance. John will discuss this in more detail shortly. In Latin America, internal operating profit increased by 11% in the first quarter, driven by a strong 7% sales growth, supported by double-digit increases in brand building. The business continues to benefit from both good innovation and effective commercial programs. And finally, internal operating profit in Asia Pacific decreased by 1% due to some weakness in Australia and a customer dispute in the region. Now, let's turn to Slide 11 and cash flow. Cash flow for the quarter was $277 million, ahead of last year's $207 million. Working capital was a little higher than we would like, given the sales weakness in the quarter. This will be an area of focus for us over the balance of the year, as we plan to reduce inventory by lowering production in our plants. Timing of capital spending contributed favorably to our cash flow performance, although we still expect to invest at a rate of 4% to 5% of sales for the year. And we purchased approximately $63 million in shares early in the quarter. Obviously, we still plan to significantly reduce the level of our share repurchases for the year, in order to pay down debt associated with the Pringles acquisition. Slide 12 details our full year guidance for 2012. To be clear, internal sales and internal operating profit exclude the impact of Pringles, but our earnings per share guidance includes Pringles-related accretion and onetime costs, as well as the impact of our reduced share repurchase program. We have adjusted our expectations for internal net sales growth to a range between 2% and 3%, and we expect volume to be down for the year, softer than we originally planned. The change in guidance is due mainly to the weakness we have seen in Europe and category softness in the U.S. We expect that gross margin for the year will be down approximately 50 to 100 basis points, and we also continue to anticipate around 7% COGS inflation, driven by commodity inflation, part of which will be offset by supply chain productivity savings. In fact, we continue to expect savings from productivity to be slightly above 3%, consistent with our long-term targets. We now anticipate that internal operating profit will be lower by 2% to 4% for the full year. Although we will invest in brand building in 2012, as I mentioned earlier, we brought our expectation for investment in brand building in Europe down from our original estimate. We've also reduced our overhead costs across the businesses and anticipate that these actions will help offset some of the impact of lower sales growth. We expect that interest expense will be slightly favorable in 2012, including the cost associated with Pringles debt, partially offset by the benefit from the interest rate hedges. We continue to expect that the full year tax rate will be approximately 30%. As you can see, we've also adjusted our guidance for reported earnings per share. Specifically, we now expect reported EPS will fall into a range between $3.18 and $3.30 per share. The impact of currency is included as a headwind of approximately $0.04, unchanged from the estimate we provided last quarter. You'll remember that we provided an earnings per share walk in our CAGNY presentation, and while some of the puts and takes in the walk related to the Pringles acquisition might change over the course of the year, our best estimate at the moment is that things haven't changed meaningfully, except for the gain on interest rate hedges. As John said earlier, we've done a lot of work on the integration planning and we'll let you know on future calls when we alter our estimates. We continue to expect that full year cash flow will be $1.1 billion to $1.2 billion, including the revised earnings guidance and the benefit of the pending acquisition of Pringles. Capital spending is still expected to be between 4% and 5% of sales. And as we told you when we announced the acquisition of Pringles, we expect to reduce our share repurchases significantly to allow us to pay down debt associated with the acquisition. Finally, we expect sales growth to improve in the second quarter, but operating profit may decline more than it did in the first quarter due to commodity inflation, timing of supply chain investments and reduced operating leverage as we reduce our inventory levels. Both sales and profit should improve in the second half as commodity inflation subsides and we lap the increase in our back half supply chain investments in 2011. And now let me turn it over to John. John A. Bryant: Thanks, Ron. Slide 13 shows the internal revenue growth for Kellogg North America and Kellogg International in the first quarter. Revenue growth in Kellogg North America was 2%. Kellogg International posted 4% lower sales in the quarter, primarily as a result of the weak results in Europe. Now, let's turn to Slide 14 and some details on our U.S. business by segment. As we highlighted in last year's 10-K, we're now providing this additional data, which will give you more insight into the business. As you all saw in the measured channel data, a majority of the U.S. food industry faced weak volume performance in the first quarter. While not all of our businesses were affected, some were, as you can see on the chart. Slide 15 shows the performance of our U.S. Morning Foods and Kashi segment. You'll remember that we mentioned last quarter that we thought the cereal category would remain challenging throughout 2012, and that was the case in the first quarter. The segment's internal net sales declined by 1.7%, due mainly to the weak category volume performance in the U.S. In fact, measured channel data shows cereal category volume down approximately 7% in the quarter, which is a significant hurdle. Total category sales were flat to up slightly in all channels in Q1, and we lost a little share after gaining an equivalent amount in 2011. So the category's relatively unchanged, as is our share over the last couple of years. Importantly, we expect that consumers will better accept recent price increases over the next few months. However, it's also important to note that our all-channel performance improved progressively as we moved through the quarter. Just as sales performance develops during the quarter, we're expecting gradually increasing growth in the business throughout the remainder of the year, given the actions we are taking and the programs and introductions we have planned. Froot Loops and Frosted Flakes posted good results in the quarter as a result of strong support, and Krave, an innovation which was launched in the U.S. at the end of last year, is doing very well. In fact, in the latest measured channel data, Krave is up to a 1 share. Our Kashi business had a good quarter and gained share in both cereal and wholesome snacks. Our GOLEAN Crisp! crumble cereal innovation exceeded expectations and the Bear Naked brand also helped drive the share performance. In fact, Kashi cereal sales increased at a mid-single-digit rate and Bear Naked cereal sales grew at a double-digit rate. So while the business had a good quarter, we expect continued growth in the balance of the year and have additional innovation planned to help us achieve these goals. Slide 16 shows the performance of our U.S. Snacks business in recent quarters. In Q1, we saw a solid 2.3% growth due to excellent results in both the crackers and cookies businesses. The cracker category increased by more than 3% in measured channels in the quarter and we gained share, driven by good growth in Special K Cracker Chips and Cheez-It. Cheez-It did well and was up high single digit in growth, partially as a result of the introduction of a new mozzarella flavor and the popular vote for the top cheese program, which allowed consumers to vote for their favorite flavor in an election year campaign. Special K Cracker Chips continue to be a huge success and the 2 newest flavors, Southwestern (sic) [Southwest] Ranch and Cheddar, are doing well, as are the existing flavors. In cookies, we saw a measured channel category growth of almost 5%. We saw a 4% growth in our Keebler brand sales, a focus for us over the last year. In our wholesome snack business, consumption declined at a mid-single-digit rate, partially as a result of the timing of innovation. However, we have some great products planned for introduction in the second half, including 2 SKUs of FiberPlus nutty delights and 2 new flavors of Special K Pastry Crisps, brown sugar cinnamon and chocolate. In addition, we've got news on Rice Krispies Treats and a new campaign on Nutri-Grain. As you can see on Slide 17, the U.S. Specialty segment had a very good quarter as a result of increased focus, innovation and improved execution. We gained share in the Foodservice channel, the largest in the segment, and in the convenience channel as well. And we increased our sales to all of our key customers, some at a double-digit rate. The segment's growth was driven by good innovation from Eggo, Special K Cracker Chips and strong growth from Morningstar Farms and Gardenburger in our frozen veggie business in Foodservice. And we also saw a growing revenue in snacking across the Specialty Channel, driven by Cheez-It and Rice Krispies Treats. Now, let's turn to Slide 18 and the North America Other segment. This segment includes our Canadian business and our frozen foods business. Sales in the Canadian business decreased in the first quarter, due mainly to difficult comparisons from 2011, given the timing of a cereal price increase last year. However, both the frozen and snack businesses gained share and we launched Special K Cracker Chips during the quarter. It's early for Special K Cracker Chips, shaping up to be a great launch in Canada. The frozen foods business had another great quarter, posting double-digit sales growth. We continue to gain share in the frozen breakfast category. In fact, sales increased in all of our frozen categories. Our Eggo Wafflers innovation has done well since its introduction in January, and sales of our Thick & Fluffy waffles continue to grow and the new pack sizes are being very well-received by consumers. Finally, from Morningstar Farms brand, new veggie hotdogs and veggie meatballs also exceeded our initial expectations in the retail channel. Now, let's turn to Slide 19 and a discussion of Kellogg International. As we have mentioned a few times already, and as you can see, the performance posted by our European business in the quarter was disappointing. You all know that this business has been challenging for some time. The weakness was due to a combination of the difficult economic environment in the region and some issues specific to Kellogg. While we're not pleased with the sales performance in the quarter, some of the issues are short term and we expect that we have seen the worst of the declines. About half of the quarter's decline came from lower consumption due to elasticity. The other half came from the timing of events and customer disputes on the continent. These disputes are now behind us, but the impact was meaningful. There have also been some operational issues, which we've worked hard to resolve. We expect Q2 sales to be down as the price settles in with consumers, and we expect that Q2's profit will decline at a rate similar to Q1's decline, reflecting absorption and inflation. However, we do have some great products planned for introduction, including All-Bran Golden Crunch, Special K chocolate and strawberry cereals on the continent, as well as Crunchy Nut cranberry and almond in cereal and Nutri-Grain breakfast biscuits, and Special K biscuit moments in snacks in the U.K. And finally, we made significant changes to management in Europe. We have a new lead in the U.K. Many of you know Paul Norman, the President of Kellogg International. Paul is now the acting head of the European business, devoting all his time to the business, and he's working hard to improve the quality of our commercial plants. The Latin American and Asia Pacific businesses are both reporting directly to me until things begin to improve in Europe. We all recognize that it will take some time to implement meaningful changes but we know that in Paul's capable hands, the situation will improve. Our Asia Pacific business posted a sales growth of 2% in the quarter. The Australian business posted a low single-digit decrease in internal sales. Most of the other areas in the region posted sales growth. The Australian market continues to be difficult, as both the cereal and snacks categories posted declines. However, we did launch Be Natural and All-Bran innovations in the first quarter, both of which have exceeded our expectations. And we have more innovation and additional commercial programs planned for the second half, that we expect to drive improved sales growth. Elsewhere in the region, we saw very good rates of growth in South Korea, Southeast Asia and India. We faced a customer issue in the region, which is now behind us. We launched some good innovation in the first quarter, including Nutri-Grain cereal. We've also just launched Corn Flakes hot porridge, which provides us with an entry into a segment that is already popular in South Africa. Our Latin American business posted 7% sales growth. We benefited from a successful Star Wars promotion and excellent innovation, including Special K Fruit and Yogurt. We also successfully relaunched All-Bran in Mexico with a simplified portfolio. And we have more All-Bran and Special K innovation planned for introduction around midyear. As a result of this activity, we expect continued strong performance from the region over the balance of the year. Now, let's turn to Slide 20 and the summary. Obviously, we're unhappy with the results we posted in the first quarter and we never want to lower guidance, but we need to run the business for the long term. While we do expect gradual improvement in our performance as the year progresses, we want to have the flexibility to make continued investment in future growth. Our revised guidance enables us to invest in the long-term health of the business. Brand building and innovation are the core of our operating principles, and we realize that periods of weak demand are the ones that provide us the greatest opportunity to increase our efforts. We are committed to our long-term model and the principles that built the company, and that's why we're so excited about the acquisition of Pringles. Pringles is a brand in which we can invest, and the combination gives us added confidence that we'll meet our long-term goals. I'm excited by the opportunities available to this great company and know we're doing the right things to strengthen our base, increase our potential and drive growth in the years to come. I'd like to take the opportunity also to thank the dedication of our 30,000 Kellogg employees globally. Their hard work can clearly make the difference for our company. With that, I'd like to open up for questions.

[Operator Instructions] Our first questioner in queue is Alexia Howard with Sanford Bernstein. Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division: Can I ask of -- actually, I guess a two-pronged question. Firstly, around the change in segmentation in the U.S., what was the thinking behind that? Because obviously, you've stuck with the same segmentation for, I guess, quite a long time now. And then specifically within the U.S. cereal business, what do you -- can you break out what the internal growth was there in terms of volume and pricing, and what you're seeing in terms of category growth and share trends there? Ronald L. Dissinger: Let me take the first part of that, Alexia. Our intent in providing the additional segmentation in North America is to provide information on how we view the business and how we manage the performance of the business as well. So we've broken out the North America position as a result of that. John A. Bryant: Alexia, if you look within the cereal category, we have, within measured data, around a 6%, 7% decline in Kellogg volume in the first quarter. So as you expect, that's coming through quite strongly in our reported results as well. In terms of the share progression, what we've seen in cereal in the first quarter is we lost about 30 basis points of share -- of value share in the measured channels, and we estimate that's probably close to the 50 basis points when you look at all channels, so including the non-measured channels, which was similar to the amount of share that we gained last year. So our share is essentially flat if you go back 2 years. I think we are seeing better performance in the non-measured channels compared to the measured channels, and we do believe that there is some shifting going on between those channels. So our volume is down in the Morning Foods and Kashi segment, and it's down sort of similar levels to what you see in the measured channel data, or they're slightly better than them. Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division: Do you have a view as to what's driving that cereal weakness in terms of volumes in the U.S.? John A. Bryant: I think we're seeing a higher level of elasticity to pricing than we expected to see in the U.S. It's higher than we saw in the first quarter of last year, and we're seeing a similar dynamic in the U.K. In terms of our business, our business declined in the first period in line with our expectations. But that elasticity has been in the marketplace for longer and at a greater rate over the quarter than we anticipated.

The next questioner in queue is David Palmer with UBS. David Palmer - UBS Investment Bank, Research Division: John, I wanted to ask you about the Europe and the U.K. You obviously mentioned that, that has been a bit of a problem area for a while. I wanted to get from you perhaps a rough breakdown of the deterioration that you saw in the quarter. How much of it was the customer-specific issue you mentioned, the operational issue you mentioned? And maybe you can elaborate on what that was. And then how much of it, of course, is a macro deterioration that we, as analysts, should be paying attention to, not just for you but for the group? John A. Bryant: It's a great question, David. When we look at Europe, clearly it's a very difficult economic environment. That's playing a little bit into our results but I think the real issue here is Kellogg-specific. We've got some issues in our business, which is -- the good news is we have the ability to fix that and get back on track in Europe. If we look in the first quarter, our sales are down around 10%. About half of that is due to consumption. Some combination within that half is due to the customer disputes, as well as higher-than-expected elasticity. And then the other half of the decline in net sales in Europe in the first quarter was due to the customer disputes impacting trade inventory levels and the timing of events. For example, our innovation on the continent was pushed from the first quarter to the second quarter because of some of those customer disputes. As I look at the U.K., most of our issues in the U.K. come down to 2 core brands: Special K and Crunchy Nut. On both of those brands, we have new campaigns coming out in the middle of the year and new innovation on both brands as well. So I believe we are taking the right steps to improve the performance in the U.K. I believe that's in our control to do that. On the continent, we actually saw, if you go back to 2011, better results in the first half of the year and then the continent was starting to soften in the back half of last year, and that softness is continuing into the front half of this year. I'm a little concerned there that the economic environment is weighing a little bit more on our business. The opportunity on the continent is really around Special K again, and we have a very exciting program in the back half of the year on that particular brand. So I feel good that we're making the right decisions in Europe and making progress. David Palmer - UBS Investment Bank, Research Division: One separate one. I think Ron mentioned the brand-building investments are going to be down in Europe this year. Is that perhaps saving your powder for the Pringles business on-boarding and an increase that could happen in 2013? I mean -- well, perhaps you could elaborate on that a little bit. Ronald L. Dissinger: We've been disappointed on the return on the investment of our European brand-building, so we have pulled back a little bit here in the first half because we didn't feel like the programs were strong enough. The back half program is still largely intact and we have some exciting ideas to put that money behind. If you look at Europe in totality, we actually spent a little bit more on brand building in Europe than we do as a company average. So I still think we have plenty of money available and investment available to drive the business. I think the key to us driving our European business in the future is to ramp up the rate of innovation. If I go back to 2010, we only launched about $40 million of new sales from innovation. 2011, $60 million. 2012, we have a stretch goal to launch $100 million of new products from innovation that are coming here later in the year.

The next questioner in queue is Andrew Lazar with Barclays. Andrew Lazar - Barclays Capital, Research Division: John, in the 10-K, as you noted, you started to break out some of the individual components of North America. And my question, I guess, is on the margin in the U.S. Morning Foods segment. It was about 20% a few years back and has moved lower every year, and I guess now is more in the 16%, 17% range. I understand the higher input cost environment and I think you mentioned some of the timing of supply chain investments, but I guess I was hoping you can provide a bit more color on this. I guess that level just strikes me as low, given my perception of the healthy sort of profitability of cereal for you and as a category, which is obviously such a key part of this segment. And I guess as part of that, do you see this more recent level as more representative of a -- sort of a structural level? Or should 20% be achievable again here in the not-too-distant future? Ronald L. Dissinger: Andrew, if you look at our 10-K, our margin on morning foods and Kashi, that segment we disclosed, was around 18%. I think it's important to note that, that segment wears the brand-building investment for all of the product lines it houses. So cereal, Pop-Tarts. It has about a 2 to 3 point drag on operating margin. So clearly, the underlying margin is a bit stronger than what you see in the 10-K. We feel very good about the margin in our morning foods and Kashi operating segment. There are no structural reasons why we can't continue to work and improve that margin. Andrew Lazar - Barclays Capital, Research Division: Got it. Do you think it kind of gets allocated a disproportionate amount of sort of the... Ronald L. Dissinger: Brand building, yes. John A. Bryant: Andrew, it keeps all the brand building in the U.S. business for those cereal brands, even though some of the sales might occur in other businesses such as specialty and even snacks to a degree that it leverages the Special K brand. To your point of the margin, we believe that we can improve the margins in morning foods, Kashi over time. That is more of a "low-single-digit sales growth"-type business and that obviously, we'd hope to drive that profitability faster in that segment. Andrew Lazar - Barclays Capital, Research Division: Got it. Okay. That's very helpful. I appreciate it. And then just one quick one on pricing. I guess I had modeled for whatever reason, although I thought pricing overall at the corporate level would be maybe something similar to what you saw in the fourth quarter or a bit higher. And it came down sequentially. So I didn't know if there was some change to what you were doing from a pricing standpoint or if it's just simply starting to lap some of the pricing from last year. I'm trying to get a better handle on that and how that moves going forward. Ronald L. Dissinger: Yes, we'd be lapping a bit of the pricing given the timing of our price execution in 2011, Andrew. So there's nothing that we've done that would structurally impact that pricing. We obviously took pricing before we entered the year in that business.

The next questioner in queue is Eric Katzman with Deutsche Bank. Eric R. Katzman - Deutsche Bank AG, Research Division: I guess I have 2 questions. One is getting back to the U.K. and EU problems. I think in past quarters, you've mentioned the competitive challenges in snacks with General Mills and Nature Valley, and Kraft with their Belvita product. Yet you didn't say anything about that. Can you talk about the competitive landscape? And why isn't that factoring into the weakness? John A. Bryant: Eric, on snacks, you're right. There have been 2 new entrants into the snacks category, both General Mills and Kraft. That has adversely impacted our business. It is down in the first quarter. It's not a huge driver of the European decline. I think our issues in Europe are more cereal-based in the first quarter, but snacks continues to be an area of opportunity for us and we have strong innovation coming out the back half of the year. Eric R. Katzman - Deutsche Bank AG, Research Division: Okay, and then I guess as a -- the follow-up would be on, what should give investors confidence and shareholders confidence that the company, with a number of challenges, seemingly kind of whipsawing things from quarter-to-quarter -- why should we have confidence, John, that Pringles is going to go kind of as planned? I mean, I realize Australia has been an area of retailer disputes, but I don't remember hearing from other companies that they've had retailer disputes in the -- in Europe. And yet, you're about to acquire a business that's got a significant portion of business around the world. Why should we have confidence that this is going to go okay? John A. Bryant: All right, let me talk about Pringles. And we remain very excited about Pringles. We think it gives us a great new platform for growth. It helps us with our international scale in several markets. And we believe it really helps us unlock the snack opportunity in International that the company has managed to achieve in the U.S. So we think Pringles is a great opportunity. We have a set of integration teams working between P&G and Kellogg to bring Pringles on board. There's a tremendous set of individuals coming with that business that we think will help us as a company going forward. And the plans that those -- that the Pringles team has are exciting for the next couple of years. So we think there's tremendous opportunity. Obviously, with any integration, particularly a carve-out, it's a complex process because we have to take it from being supported by P&G's IT systems and support functions to Kellogg. That's why we have teams working on this and we're spending a lot of time and effort making sure this goes seamlessly. On the broader issues, Eric, I recognize that there's been more volatility in the last year or 2 in our business. I think that reflects what has happened to us over a longer period of time. So if you go back to 2001 through 2009, the company had tremendous momentum. Our sustainable growth model was working. We were reinvesting back in the business, growing our front foot. And bad things were happening to us. We were able to resolve them and just keep moving. 2010, '11, we had the supply chain issues in our business. We invested back a significant amount of money, capital, time, operating expense, resources and that took away our momentum as a company. We're working to rebuild the momentum. We saw some good top line momentum in 2011. We're off to a disappointing start in 2012. I believe the first quarter is more of an anomaly, but we're providing pragmatic guidance for the year of 2% to 3% top line growth, and I believe we're making the right decisions for the long term to get ourselves back on track. Eric R. Katzman - Deutsche Bank AG, Research Division: If I could just follow-up on that, so what should we read into these retailer disputes? I mean, is it the retailer power in kicking you while you're down? Like, are they taking the opportunity to pick a company that's lost its momentum and trying to gain things? Or because again, I don't remember hearing from other companies so many retailer disputes. John A. Bryant: Eric, I think that taking pricing in continental Europe is probably the most difficult part of the world to take pricing in. In a commodity-inflationary environment, we need to take that pricing to protect the long-term economics of our business. And that can be -- that can lead to very difficult discussions, loss of promotional activity. And it is the nature of the business. It's hard to predict when or how long those things will occur. It happened to us here in the first quarter of this year.

Next questioner in queue is Ken Goldman with JPMorgan. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Can you talk a little bit about the decision to lower production in your plants, I think that's what you said, in order to reduce inventory? I understand the move, but how should we think about and perhaps model the impact on your fixed cost leverage from this decision? Ronald L. Dissinger: Yes, it's -- you can expect over the next couple of quarters that we'll see some adverse impact flowing through our cost of goods sold as a result. So when we came to the first quarter, as a result of sales being a bit softer than expected, we ended up with higher inventory levels, as I said. So over the next couple of quarters, we'll see an adverse impact from reduced operating leverage by pulling production levels down and pulling our inventories down. Kenneth Goldman - JP Morgan Chase & Co, Research Division: That's helpful. Is there any way for us to kind of quantify that? Or is it too early to tell? Ronald L. Dissinger: Yes, too early to -- I wouldn't say too early necessarily, but to quantify it, I believe, would not be appropriate at this point in time. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Okay, and then one other question, but this will be -- you're not the only company, but this will be the sixth year out of 7 that your gross margins are supposed to go down. I appreciate we're in a very difficult long-term cost environment, but how should you and how should we think about your gross margin long-term going forward, right? Is there an opportunity for Kellogg to start growing this line again if inflation flattens out? Or is there something more structural that I guess will lead to some softness, maybe some declines going forward, again on a long-term basis, even if commodities become less volatile? And I'm thinking excluding Pringles here. I know that throws a wrench in the machine a little bit. John A. Bryant: Ken, I think there's no structural reason why we can't grow our gross margin. So we can absolutely grow our gross margin in the future. Our long-term metrics are for sales growth of around 3% to 4%. We think we can grow gross profit dollars faster than that. That means you're going to get gross margin expansion, and then we put back in the brand-building investment and drive mid-single-digit operating profit growth. So structurally, we can do it. We have struggled in the last few years with hyper-commodity inflationary environment and with having to invest back in our supply chain. But we did this for many years across the 2000s and we believe with the right economic environment, we can do it again.

The next questioner in queue is David Driscoll with Citi Investment.

This is Cornell Burnette on the line with a question for David. I just wanted to focus back on Europe here, and it seems that many of the issues that really negatively impacted the first quarter look like they're set to abate, at least when we get to the second half of the year. In other words, I think you'll be lapping a lot of the pricing that you took last year. You should have easier comps, as you mentioned, on the continent and then overall, you seem to have much more of your innovation weighted towards the second half. So with that in mind, is it possible that second half volumes in Europe can stabilize? Or are there still some issues that may prevent you from doing that? John A. Bryant: I'd rather not get into volume projections at a segment level, but I think your basic thesis is right. I think we're going to have -- continue to have some pressure in Q2, for it takes time to turn these businesses around. But we do expect better performance in the back half. And I think to say we could stabilize Europe in the back half, that would certainly be our goal.

Next questioner in queue is Jonathan Feeney with Janney Capital Markets. Jonathan P. Feeney - Janney Montgomery Scott LLC, Research Division: I wanted to dig in a little more -- the exact way about how costs are going to flow through this year. Because clearly, it seems to me that spot costs have fallen fairly precipitously and you're just reporting your quarter here where gross profits are sort of flat on what looks like 4.4% pricing. So I know we're lapping a little bit of pricing and I know you certainly want to -- have some investment needs, but can you just walk us through how you're going to time investment needs with what presumably has to be a pretty big impact, if we're even able to hold flat pricing out from these cost declines, versus where they're coming through on the income statement right now? Ronald L. Dissinger: Sure, Jonathan. Well, let me take the cost piece first. So we've talked about cost inflation of approximately 7%. And we're seeing probably 0.5 points to 1 point more in the front half of the year and 0.5 points to a 1 point less in the back half of the year. So we are seeing more commodity inflation in the front half and that's because of the positions that we take over the course of a year related to commodity hedging. In terms of our investment structure, I suspect you're referring to brand-building investment. You'll see that start to ramp up a little bit in the second quarter, but more towards the back end -- back half of the year. Jonathan P. Feeney - Janney Montgomery Scott LLC, Research Division: Okay, and maybe if I could get just one follow-up, Ron. So you're talking, say, 0.5% down from there. So let's call it 5 -- plus 5% year-over-year expected cost. I mean, how far do you guys usually hedge out? Because if I look at corn or wheat or any of the big inputs, and maybe something you're buying that I don't know about, but it seems to me like it indicates they're all down pretty measurably on a year-over-year basis. At some point, that would have to flow through even this year, and -- unless it's your practice to hedge out 12 months or more. Ronald L. Dissinger: We hedge out generally not more than 12 months. So it really is more a factor of lapping our positions that we took for the front half of 2011, Jonathan. Jonathan P. Feeney - Janney Montgomery Scott LLC, Research Division: Oh, I see. So you hedged advantageously last... Ronald L. Dissinger: That's correct.

The next questioner in queue is Scott Mushkin with Jefferies & Company. Scott Andrew Mushkin - Jefferies & Company, Inc., Research Division: I wanted to go back to a couple of questions before, take a step kind of off, I guess, to like almost 30,000 feet. Just, if I looked at the industry views, and it's not just Kellogg, that volumes pretty much have been declining for a while now, kind of coincidental with the financial crisis, but almost like you're -- do you think your consumer is changing? And kind of the traditional playbook that's behind these brands, innovate and things will be okay -- do you think the playbook is a little bit changing and we need to do something a little bit more radical to follow our consumer? I'd like your take on that, please. John A. Bryant: Well, I think there's a couple of things that have been weighing on our volume over the last few years. One is high level of commodity inflation, which has required an abnormally high level of inflation -- of pricing, I should say. And that's, obviously, adversely impacted us from a volume perspective. In addition, if you go back to 2009, 2010, we had meaningfully lower innovation levels as a company, which are going to start to ramp up in 2011 and 2012. That's also weighed on our volume performance as well. I believe if you go forward here, at the end of the day, if you provide great products to consumers, you engage them through outstanding advertising, you'll absolutely bring those consumers into your portfolio and we can drive volume growth as a company. If we can get to a normal inflationary cycle, so we're taking a normal level of pricing, I believe we can generate that 3% to 4% sales growth from a combination of volume, price and mix. I recognize the volume performance has been below where we want it to be for the last few years. I don't believe there's a change in the structural nature of the business or a change in fundamental consumer behavior. I think it just reflects the dynamic that we've been going through over the last 3 or 4 years. Scott Andrew Mushkin - Jefferies & Company, Inc., Research Division: I appreciate that. I mean, one observation I'd make is some places in the consumer [indiscernible] vertical including home vertical, where actually it's growing pretty rapidly, including volume. Second question, I just want to make sure I understood what's going on in North America specifically. Did you say it was the cadence in the quarter on the volume was improving? Or was it -- or wasn't, and I wasn't sure I caught that. My [indiscernible] breaking up at that point. That's my last questions. John A. Bryant: Maybe the -- you can see within the measured channel data that the volume consumption on our business was improving as we went through the first quarter. So I think talking about that one segment specifically, our volume was doing well. I think we are generally seeing the volume trends improving in the business as we go through the year. Scott Andrew Mushkin - Jefferies & Company, Inc., Research Division: So you see that happening through the year and it -- in the measured channel, it happened overall in the business as it happened. And then the second question would be, what's the degree here? Are we really ramping up? And could we break even? Or is that just not going to happen? John A. Bryant: I think if you look at our full year guidance this year, we have around 2% to 3% sales growth, which implies volume is going to be down 1% or 2% on the year. So we're not expecting volume to bounce back, but nor are we expecting 3% to 4% volume declines for the year.

The next questioner in queue is Chris Growe with Stifel, Nicolaus. Christopher Growe - Stifel, Nicolaus & Co., Inc., Research Division: I want to ask you, John, in relation to some of the volume weakness that you're seeing, and I just obviously heard your answer and your discussion on the call about improving through the year and maybe some elasticity, but is there a need in the short run to be a little more promotional in certain businesses, be it in the U.S. or I guess, to a larger degree in Europe, to try and stabilize volume versus pricing to get that piece of business improved? John A. Bryant: Chris, we have looked at the performance of our first quarter business and have looked at where we've had some more price elasticity than we expected, and we've tweaked our plans as you'd expect us to do. I don't think that's going to substantially change our price realization as a company. I think it's just us reacting to the environment in which we're operating and ensuring that the right pressure against the brands that are suffering a little bit more. Christopher Growe - Stifel, Nicolaus & Co., Inc., Research Division: Okay, and then just a bit of a follow-on to an earlier question. I guess, if -- from the comments you've made on the call today, I don't think I'm still clear on where you have to invest. Obviously, Europe and the U.S., but it sounds like in Europe, you're actually not getting the return on the investment dollar. So am I just misunderstanding the way you're looking at that? But how is the investment -- where is the investment going this year, I guess, to benefit your revenue growth? John A. Bryant: Our intention is to grow brand building at or above the rate of sales growth. So it is some investment, but I wouldn't suggest that it's a massive level of investment. That investment can go into a number of places. We're very excited about our growth potential in Latin America, in Asia, expanding out some of the emerging market businesses. So I'm not sure you should look to -- for us to invest behind where we might be having some issues, so much as invest behind where we think our future growth can come from. Christopher Growe - Stifel, Nicolaus & Co., Inc., Research Division: Okay, do you still have that new product goal of around $900 million? Is that still a good number to use for new product opportunities this year? John A. Bryant: We are still tracking to $900 million of launches this year.

The next questioner in queue is Rob Dickerson with Consumer Edge. Robert Dickerson - Consumer Edge Research, LLC: I just have 2 quick questions. Are you -- I guess the first question is, could you provide or will you provide and do you expect to provide in the future just the volume price breakout that you've always done per geography segment? Or is that -- should we not expect that going forward? Ronald L. Dissinger: Yes, we will make commentary within our Q when it comes out on the drivers of sales performance, Rob. So take a look at the Q and that should provide you with more information. Robert Dickerson - Consumer Edge Research, LLC: Okay, perfect. And then the other more housekeeping question was just on -- I didn't hear anyone mention this, I don't think. It was just the -- it looked like it was about a $40-million benefit in net expense, the other income and interest expense year-over-year, which winds up being about $0.08 or so, $0.08 or $0.09. And I didn't -- I don't think you talked about it in the prepared remarks. So could you just add a little color, unless I've completely missed something, as to why there is a $13-million benefit in other income? Ronald L. Dissinger: Be happy to. First of all, and probably the most significant item, is we get about $0.05 of benefit associated with interest rate hedges we placed in association with the Pringles debt that we intend to take. So that's the biggest factor. We did have some other discrete benefits in the first quarter, as well, in other income and expense. It's important to note also though that if you look at tax, for example, we're lapping some discrete benefits in tax for the first quarter. So if I look at other income, expense and tax, wrap all those together, we're relatively neutral. The $0.05 of benefit from the interest rate hedges is really the key benefit below the line. Robert Dickerson - Consumer Edge Research, LLC: Okay, so then all of that $0.05 is below the line. There's nothing that would be inclusive within COGS, that I should... Ronald L. Dissinger: That is correct. Yes.

The next questioner in queue is Rob Moskow with Crédit Suisse. Robert Moskow - Crédit Suisse AG, Research Division: Can you talk a little bit about the health of the Kashi brand? I just noticed that in your innovation, I haven't seen much, at least on the grain snacks or cereal side. You're doing more in frozen. But this used to be a real growth driver of the company. Has that leveled off? And then maybe talk about Special K also. Is that making up for some of the difference? John A. Bryant: Kashi, as we discussed before, had a difficult time during the deep element of the recession. The good news is in the first quarter, we actually saw very good growth from Kashi. It was up mid-single-digits and Bear Naked was up double digits. So the whole natural adult-oriented cereal segment, we think, is well positioned for long-term growth and we're excited about that business. There is some new innovation there on cereal and on wholesome snacks, and we believe we can continue to grow that business over time. So we feel good there. On Special K, I think one element of our weakness in the first quarter was actually Special K. We had a very good New Year's resolution program as a company. However, within that New Year's resolution event, we did a multi-category event. We saw a very good lift on Special K Cracker Chips and so on, but we didn't feature cereal quite essentially in that program this year as we have in the past. And so our Special K cereal didn't do quite as well. And so that did weigh a little bit on our first quarter results.

Our final question for today will be Matthew Grainger with Morgan Stanley. Matthew C. Grainger - Morgan Stanley, Research Division: So if we assume that the revised guidance entails -- potentially entails a change or a haircut to what you may have initially planned for incentive compensation for 2012, how should we think about the risk that if the business then performs to plan in 2013, this could create a headwind similar to, but maybe not at the same magnitude of what you faced in 2011? John A. Bryant: Yes, that's a great question, Matthew. We have a pay-for-performance culture as a company. And clearly, my bonus is not looking that good for 2012. Having said that, a large number of businesses are doing quite well: Latin America, Asia, frozen, specialty, Kashi, elements of the snack business. So we're not expecting anything like the 2010, 2011 dynamic, where the bonus program was cut in 2010 and caused an issue for 2011. So nothing like that is expected for this year, next year.

And again, that does conclude our time for questions. I'd like to turn the call back over to management for any additional or closing remarks.

Okay, everybody, thanks very much for joining us. We'll be available, obviously, throughout the rest of the day and the days to come. We look forward to talking to you then. Thanks again.

Thank you, sir. Again, ladies and gentlemen, this does conclude today's program. Thank you for your participation and have a wonderful day. Attendees, you may disconnect at this time.