Simon Burton - Executive Officer of Snacks business unit John A. Bryant - Chairman of the Board, Chief Executive Officer, President and Member of Executive Committee Ronald L. Dissinger - Chief Financial Officer Alistair D. Hirst - Senior Vice President of Global Supply Chain

David Hayes - Nomura Securities Co. Ltd., Research Division Kenneth Goldman - JP Morgan Chase & Co, Research Division Andrew Lazar - Barclays Capital, Research Division Robert Moskow - Crédit Suisse AG, Research Division Bryan D. Spillane - BofA Merrill Lynch, Research Division David C. Driscoll - Citigroup Inc, Research Division David Palmer - RBC Capital Markets, LLC, Research Division Eric R. Katzman - Deutsche Bank AG, Research Division Jason English - Goldman Sachs Group Inc., Research Division Diane Geissler - CLSA Limited, Research Division Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division John J. Baumgartner - Wells Fargo Securities, LLC, Research Division

Good morning. Welcome to the Kellogg's Company Third Quarter 2014 Earnings Call. [Operator Instructions] At this time, I will turn the call over to Simon Burton, Vice President of Investor Relations for Kellogg Company. Mr. Burton, you may begin your conference call.

Thanks, Keith, and good morning, everyone. Thank you for joining us today for a review of our third quarter 2014 results. I'm joined by John Bryant, Chairman and CEO; Ron Dissinger, Chief Financial Officer; and Alistair Hirst, Senior VP of Supply Chain. 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 made 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 cost, 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 the 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, November 3. And the call will also be available via webcast, which will be archived for at least 90 days. And now I'll turn it over to John. John A. Bryant: Thanks, Simon. And thank you, everyone, for joining us. Today we announced third quarter earnings per share that were ahead of our expectations. In addition, our results for operating profit were greater than we had anticipated and sales was slightly below. As we mentioned at the back-to-school conference last month, we continue to face headwinds in developed markets and categories, although we saw a good sales growth in Latin America and Asia-Pacific in the quarter. Also, as we highlighted at the conference, we have some exciting ideas for innovation and brand building in 2015. As a result of our third quarter performance being mostly as we had expected, we are maintaining our guidance for the full year. Ron will provide more color regarding this later, but we continue to expect that for the full year, internal net sales will be down between 1% and 2%; underlying internal operating profit will be down between 1% and 3%; and currency-neutral comparable earnings per share will be between up 1% and down 1%. Also, as you can see highlighted on the slide, we continue to make progress on Project K, our 4-year efficiency and effectiveness program. In the third quarter, we opened our North American service center, as part of the global business services initiative. We also announced the closure of our snack plant in Columbus, Georgia and the reduction of production at our Manchester, U.K. plant. We are very pleased with the progress we have made so far, and Alistair will give more detail regarding the supply chain organization and Project K in a few minutes. Now let's turn to Slide 4 in a brief discussion to some of the things we're working on for 2015. We've spoken to you over the last year about some of the challenges that we faced in developed categories and regions, particularly with our weight management brands. We've also told you how we've begun to tailor our R&D efforts and support to better address consumer trends. Specifically, we've been working hard on Special K globally and on Kashi in the U.S. In the U.S., this includes innovation like Kashi GOLEAN Crunch!, which is non-GMO verified, Bear Naked Granola, Kashi Organic Promise sprouted grains and Raisin Chia Granola. And it also includes Special K gluten-free and Special K protein. In fact, in the U.S., we are completely redesigning Special K and are relaunching it is a healthy lifestyle brand across our categories. We're also relaunching the brand in other regions around the world. I'll talk more about this later. And we've got a lot more planned too, just some of which you can see on the slide. You'll also see some of the broader brand-building initiatives that we have planned for early in 2015 detailed on the chart. In the U.S. these plans include the Give A Child A Breakfast Program and the Kellogg's Open For Breakfast Program. Slide 5 shows specific detail regarding our Breakfast for Better Days program. We believe that eating breakfast leads to better days and better lives. As a result, we have focused our global philanthropic efforts on providing breakfast to those who need it most. As part of the program, we will donate 1 billion servings of cereal and snacks by the end of 2016 to children and families in need worldwide. To increase the impact of this program, we also engage in campaigns that provide support for breakfast programs when consumers purchase Kellogg's cereal. In 2015, we will run this program in 15 countries. Our company is built on a history of caring about these issues. And we know that consumers, particularly millennials, share these values. And now I'll turn it over to Ron, for a discussion of our financial performance. Ronald L. Dissinger: Thanks, John, and good morning. Slide 6 shows the financial results for the third quarter. Internal sales declined by 1.7%, approximately equal to last quarter's performance and slightly below our expectations. As John mentioned, we saw good growth in both Latin America and Asia-Pacific, as sales in our U.S. Morning Foods and U.S. Snacks businesses were below expectations. Underlying internal operating profit decreased by 1.8%. This was better than our expectations. We managed our overhead investment lower and reduced incentive compensation to align the performance. While we increased brand building in our developed cereal businesses, overall brand building was slightly lower year-over-year but comparable as a percent to sales. Comparable earnings per share, which exclude integration costs, mark-to-market adjustments and Project K costs, were $0.94 per share in the quarter. This result included a negative $0.01 per share impact from a higher tax rate. Currency translation had no impact on earnings year-over-year. Reported earnings per share for the quarter were $0.62, including $0.02 of Pringles integration costs, $0.19 of upfront cost related to Project K and an $0.11 impact from mark-to-market adjustments. Slide 7 shows the composition of the third quarter sales growth. Total internal sales declined by 1.7% and total price and mix improved by 0.2%. Both Latin America and Asia-Pacific posted gains. Volume decreased by 1.9% in the quarter. This decline was the result of the performance of our developed cereal businesses around the world and the performance of the U.S. Snacks business. We do continue to see good volume growth in our international snack businesses and in our cereal business in Asia. Finally, currency translation impacted reported sales growth by a negative 0.4% in the quarter, primarily as a result of the euro and the Canadian dollar. Slide 8 shows our underlying recorded gross profit and gross margin for the quarter. Our underlying gross margin decreased by 20 basis points in the quarter and was impacted by a fixed cost absorption due to the lower volume in our network. We also saw a bit more inflation in cost of goods sold related to distribution costs. Our savings from productivity were in line with expectations. We're essentially covered on commodities and packaging for the remainder of the year and we have taken some coverage on commodities and packaging for next year. We'll give you guidance for 2015 on the fourth quarter conference call, but material related inflation for next year currently looks to be relatively benign. Slide 9 shows the quarterly internal operating profit performance for each of the regions. North America's internal operating profit decreased by 9%. This is driven by our lower sales performance particularly in the cereals and snacks businesses. In addition capacity issues as a co-factor had an impact on the sales and profitability of our specialty business. Investment in brand building as a percent of sales was unchanged in North America in the third quarter, although we did increase our investment in cereal at a high single-digit basis. We expect improvements in operating profit performance in the fourth quarter in North America, although we continue to expect that operating profit will be down for the year. Internal operating profit in Europe increased by 4% in the quarter. This growth was primarily driven by lower input inflation as well as productivity savings and cost of goods sold. Internal operating profit grew by 20% in Latin America. Top line growth of more than 7% drove the result. In addition, the growth in operating profit included a double-digit increase in brand building in the period. And we saw an increase in internal operating cost of 5% in the Asia-Pacific region in the quarter. This is driven by solid top line growth and strong productivity in cost of goods sold. And the results also included an increase in investment and brand building. Slide 10 shows year-to-date cash flow through the third quarter. Cash flow from operations was $1.18 billion on track with our expectations for the year, and we still expect cash flow from operations, after capital spending, to be at the low end of our range between $1 billion and $1.1 billion. Cash flow through the third quarter was below last year's level, primarily due to the cash required for Project K. We continue to make good progress on our accounts payable initiative and expect it to improve annual cash flow by around $200 million this year. Capital spending was $355 million so far this year. And our expectation is that capital spending for the full year will be between 4% and 5% of sales, including investment for Pringles, Project K and a new plant in India. And finally, share repurchases through the third quarter were $690 million. And it's worth noting that we have returned approximately $1 billion to shareowners so far this year. We continue to expect that we'll reduce our average share count by approximately 1.5% over the full year. Now let's turn to Slide 11 in our guidance for 2014. As always, this guidance excludes items that affect comparability and please see our notes for details. It's important to know that our currency-neutral guidance remains consistent with our prior outlook. Currency was previously expected to provide a $0.03 benefit to earnings per share, and we now expect it to be neutral for the year. As John mentioned, we continue to expect that internal net sales will be down between 1% and 2% for the full year. Total cost of goods inflation is expected to be near the high end of our 3% to 4% range, but we still expect that productivity and savings from Project K will more than offset the inflation. This should lead to moderate net deflation for the year. And we now expect that underlying reported gross margins will be flat to down slightly for the full year, including higher distribution costs and lower volume through our manufacturing plants. We continue to expect that underlying internal operating profit will be in a range between down 1% and down 3%. And we continue to expect that currency-neutral comparable earnings will be in a range between down 1% and up 1% or $3.81 to $3.89 per share. We still expect that the 53rd week will add approximately $0.07 per share. And as I mentioned earlier, currency will now have no year-over-year impact. This should result in an earnings per share, including the 53rd week, of $3.88 to $3.96. The tax rate is expected to be approximately 29% and interest expense is now anticipated to be approximately $210 million. And as I mentioned earlier, we continue to anticipate that cash flow will be at the low end of the range between $1 billion and $1.1 billion. And we still expect capital spending to be between 4% and 5% of sales. The only change to the earnings per share walk on Slide 12 is the outlook for the impact of currencies. Note that this outlook still excludes any potential impact from the devaluation of the Venezuelan bolivar. Our estimates for integration cost have not changed and are still between $0.07 and $0.09 per share. Project K costs are expected to be in the range of $0.60 to $0.65 per share. And now, I'll turn it over to Alistair for some comments on supply chain and Project K, before John discusses the operating segments. Alistair D. Hirst: Thank you, Ron, and good morning, everyone. Slide 14 details the vision we have for the supply chain organization and it's one that I showed you last year. We have a great supply chain team here at Kellogg and we are committed to delivering high-quality food while developing a supply-chain that creates the best value for the lowest cost. And we've made some significant changes to the organization over the last 3 years. I'll talk more about that in a minute, but some of the improvements we've made and the processes we've implemented, combined with the Project K initiative, have allowed us to continue to reach our goals and provide flexibility to the broader organization. In fact, we continuously strive to be a strong stable foundation from which the company can grow. Now let's turn to Slide 15 and a few details regarding the initiatives underway in the organization. First, we are aligning the network to better reflect the current state of the business and to anticipate future demands. A lot of work has been done. A lot of work is underway to build the supply chain of the future. We have also done a lot of work to better organize the structure of the supply chain. This has involved changes designed to improve the efficiency and effectiveness of both our processes and production. And finally, we have made a significant amount of progress implementing our global business services initiative. So let's take look at each in a little more detail. First, let's look at Slide 16 and some more detail regarding the alignment of the supply chain network. We are a year into Project K and we have announced a number of changes to the network. And we are on plan in all 4 regions. We are targeting having the right number of plants and the right amount of capacity within those plants in each of the businesses. As I said, we must create the supply chain of the future, one that anticipates the needs of the business in the years to come. In North America, we've announced consolidation in both our cereal and snack networks and we are executing the real occasional[ph] production according to plan. In Europe, we've announced the reduction of capacity at cereal plants in the U.K. and we've also successfully begun producing Pringles in Poland at our new snack facility in Kutno. We are particularly proud of our teams in Europe and Kutno for bringing this plant online in the vertical startup between the production of the first chip on June 13 and the completion of the first shippable case on June 28. And this plant has already produced well over 15 million cans of Pringles and is at 80% utilization. In Latin America, we've successfully completed a restructuring of the supply chain and have successfully executed a decoupling strategy between the Mexican and Guatemalan businesses. This means that we now ship both product to Guatemala, where it's packed to demand. In Asia-Pacific we've announced the construction of a Pringles plant in Malaysia and increasing capacity at a snacks plant in Thailand and construction of a cereal plant in India, each of which will supply product to the Asia-Pacific region. And again, all of this has been done to plan and on budget. As you can tell, with a lot of work underway, we're continuing to review the network for a few good opportunities. Slide 17 shows a few specifics regarding changes to the structure of the supply chain organization. We have standardized processes and streamlined the organization. First, we have invested a significant amount of resource in the development of both people and processes in what we call design to value. This is just what you'd imagine. It's coordination across insights, marketing, research and development and supply chain to take an idea and get the design of the food and packaging right and to give the consumer what they're willing to pay for. And as importantly, it's also about getting the economics of the design right at the same time. The second part of the process is what we call produce to design. Producing exactly what was envisioned in the development process is very important for the success of the food and also for the economics of the introduction. And it has a meaningful impact on the quality of the food we produce. So we've also invested a significant amount of time on improving this process. And we've done this while also reducing corporate supply chain overhead. Now let's turn to Slide 18 and the final piece of Project K and some of the additional changes we've made to the supply chain. We have made great progress in the implementation of the global business services initiative or GBS. This initiative will focus on 4 functions, with the first being the finance function. We have announced 2 regional hubs, 1 is in Michigan for North America and the other is in Bucharest for Europe. Our GBS is a three-tiered model, a smaller amount of the company's functional work will continue to be done in the business units and the remainder will be done at the global service center. The North America Center opened in the third quarter of this year and the European center will open next year. In addition, other parts of GBS are having a positive impact, too, although it's early in the process. In source-to-pay, we are focused on global analysis in the procurement function, which has made the process more efficient and effective. We've also been driving the efficiency of our demand planning activities, which is simply a means of improving our forecast accuracy, which will lead to lower inventory, less waste, lower logistics cost, better fill rate and increased efficiency. And it will also support our plans to drive sustainability, as I'll discuss in a minute. As our transportation group is working on increasing the efficiency of our network and we're seeing meaningful savings, which are helping us to mitigate the cost inflation that Ron just previously mentioned. And now as you'll to turn to Slide 19, you'll see the time line detailing areas of focus for the organization. In 2012, we focused on the fundamentals and saw a lot of success. In 2014, we are continuing to focus on the right to win. This includes the implementation of Kellogg Work Systems or KWS. KWS is a proven model that promotes employee engagement and drives increased efficiency, including lower rates of waste. And KWS, along with other initiatives, has helped us build a stable manufacturing network. This in turn has provided a base for increased productivity in the supply chain organization and in other areas of the business. I'll talk about some of the successes we've had in a minute. And finally, is the right to lead. Some of the activities that I have already mentioned will contribute to the creation of truly end-to-end supply chain solutions over the next couple of years. This important next step will be our focus in both 2015 and 2016. As I told you last year, we want to be dependable but agile, and we must drive profitable sales growth. And most importantly, we must do all of this while maintaining the safety of our food and our people. As I mentioned earlier, Slide 20 shows detail regarding some of the successes we've had as we've executed the right to win initiatives. We've seen good performance on safety rates over recent years, as the total recordable incident rate has remained low. Our history of driving cost savings through productivity has been very good with us meeting or exceeding our target of 3% to 4% annual savings in recent years. And on food safety, we've seen a measurable improvement. Obviously, each of these areas remains very important to us. They represent a continuous process. And we believe that the great work we've done over the past few years can continue and that our performance can actually improve even more. And finally, before we reach the summary, let's turn to Slide 21 on our commitments to sustainability. As you know, we view improvement in this area as a continuous journey and it is one to which we are strongly committed. We understand that our consumers are concerned about the environment, where their food comes from and how it is grown, as are we. Sustainability of being part of the company for more than 100 years, and we recently announced commitments for global sustainability that we plan to achieve by 2020. We are focusing our support in the livelihoods of the farmers, growers and suppliers that rely on us and on whom we depend. And in addition, we are building up on the environmental commitments we announced in 2008, as we work to further conserve natural resources, where we source and produce our foods. Of course, these are the right things to do for our suppliers, our employees, our customers and our consumers, but they're also the right thing to do for the health of the business and that help cost savings and increased productivity. So let's turn now to Slide 22 and my summary. The supply chain organization has come a long way in recent years. We have increased our performance when measured by a number of metrics. And most importantly, we've built a solid and dependable base, which can enable future growth and profitability. We have started to realign the network to provide a footprint that will serve the future Kellogg. We've invested in improving the whole supply chain from design to production. We've seen significant improvement already and expect more as we develop these initiatives over the next couple of years. And we're driving increased effectiveness and efficiency through the implementation of GBS. Project K, the evolution of the supply chain, the savings we get and the reinvestment are all a process. We're on a 4-year journey. It is going well so far. And we are optimistic regarding our ability to drive it further in the years to come. And we remain confident in our flexibility where developing will drive future profitable growth. And now I'd like to end by thanking all of the employees of the supply chain organization globally for all their hard work. The process isn't an easy one, but they are executing with excellence. And now I'll turn it back over to John. John A. Bryant: Thanks, Alistair. Now let's turn to Slide 23 and some specifics regarding the Morning Foods business. As you can see, internal net sales declined by 4.7% in the quarter. We started our category building programs in the second quarter in the U.S. and the third quarter in the U.K. and Australia. In the U.S., it's fair to say that while we saw some improvement in our consumption trends in general, and in Q2 in particular, we saw less improvement than we have hoped. We are continuing our media investment in the fourth quarter. And as I mentioned earlier, we have more initiatives planned for early 2015 and more to come later in the year. Remember that this is an ongoing initiative. we've got some exciting ideas planned. We remain confident that the category will return to growth over time. Specifically in the third quarter, Special K and Kashi accounted for all of our declining category share. So on Special K, we are changing the positioning of the brand by focus on dieting to weight loss. This focus will stress the role that Special K can play in the healthy lifestyle. We are reinventing all aspects of the Special K brand in 2015. This will include innovation, packaging, advertising and consumer promotion. And each of these changes will highlight Special K's position as part of our weight loss program. We have new packaging and advertising that highlight the simplicity and goodness of the food. We have consumer promotions that will help people meet their goals, and we have innovation, including Special K protein and Special K food and treats that will directly appeal to consumer trends. And we'll also extend innovations beyond the traditional cereal category, with more hot cereals planned. Also, we launched the Special K goes beyond cereal and captures all the elements of the brand in the U.S., including Special K cracker chips and Special K bars. We also have plans for Kashi. This is a great brand in a category that's on trend and we need to lead more with both the Kashi and the Bear Naked brands. We are completing the renovation of the GOLEAN brand, to make it certified GMO free. We're converting the heart-to-heart brand to USDA organic, and we're targeting more progressive nutrition with innovation, such as sprouted grains, chia granola and others. On Bear Naked, we're experimenting with new blends of granola and we've also got some new Bear Naked bars. As you know, David Denholm and his team are just getting started on the transition of Kashi and Bare Naked and we know that making structural improvements is not a quick fix. However, we are making the right decisions and we think that these great brands will return to growth over time. And finally for Morning Foods. Consumption in our Pop-Tarts business declined in the quarter due to difficult comparisons, resulting from the introduction of Peanut Butter Pop-Tarts last year and the timing of introductions this year. We've got a new PB&J variety of planned introduction in November and believe that this business will return to growth. So we're making progress with our plans for the cereal business, and to driving category growth over the longer term. We're addressing the issues we face and the team is doing a lot of work on both innovation and brand building. As I mentioned earlier, we realized that there is no quick fix in this business, but we're confident that we'll start to see improvement, as we progress through next year. Now let's turn to Slide 24, and take a closer look at our cereal plans for 2015. The slide is similar to one that Paul Norman shared with you at the back-to-school conference, and highlights the actions we will take to drive improvement in the cereal category in developed markets. First of all, consumer trends are continually evolving and we have to better appeal to changing views on helpful moments. This means meeting the changing needs of consumers and more quickly addressing the trends that we saw. For example, you can see on the chart Kashi Organic sprouted grains and Kashi Raisin and chia granola. These new products, along with high-protein Special K and gluten-free Special K are our first step in the right direction. Next, we must continue to offer better convenience through the use of new packaging ideas, the development of new foods and entry into adjacencies like breakfast drinks. Next, as I mentioned earlier, we must engage on the consumers on the issues that they care most about as we're doing with our Breakfast for Better Days programs and our Open for Breakfast platform. And finally, we have to drive better impact through the path to purchase. This means having excellent sales fundamentals and great in-store execution. It also means adding fun back into the bars and driving bigger events and more in-store bid-up. These are our 4 main areas of focus as we head into next year. Let's turn to Slide 25 and our U.S. Snacks business. Internal net sales declined by 4.2% in the third quarter. It's important to note that this performance was driven by weakness in weight management products, as it was in the cereal business. In fact, Special K bars, Special K cracker chips and Right Bites' 100-calorie cookie packs accounted for essentially all of the quarterly sales decline posted in this segment. Again, 0.3 of a point of share in the cracker category in the quarter. The Cheez-It brand posted consumption growth of 2.9%, Town House posted growth of 4.9% and account posted growth of 6.5%, all significantly better than the category's performance. Cheez-It groups has gained more than a point of share since it was launched earlier this year and the original versions of both Town House and Club brands continue to post good results due to brand building support and good sales execution. We lost share in the cookie category in the quarter. Of those I mentioned, Chip Deluxe and Fudge Shoppe posted good growth in consumption headed by Chips Delights products co-branded with M&Ms and by Fudge Shoppe pantry packs. Our cookie business was, again, most affected by the consumption of Right Buys' 100-calorie packs, consumption declined at an accelerated rate and accounted for more than half of Kellogg's share loss in the quarter. We again saw the effect of reductions in the number of SKUs in the tail that we told you about last quarter, and we expect this impact will continue for the balance of this year and into early next year. Consumption in the wholesome snack category declined by almost 2% in the period and Kellogg lost share. Within that though, Nutri-Grain posted a slight gain in category share and Rice Krispies Treats posted a double-digit increase in consumption and gained 0.8 of a point of share. The strong performance of our Rice Krispies was aided by good cohort and of the launch of new Rice Krispies treat blast. Kellogg's overall share loss was driven by declines in the consumption of both Special K bars and FiberPlus bars. The issues with these brands are similar to ones we've seen in the cereal category. To address these issues, we have new products and activities planned for introduction in the fourth quarter and in 2015. For example, we are launching differentiated Special K bars and new Special K Cracker Chips and are completely relaunching the brand in early 2015. The Pringles business posted net sales growth of approximately 7% in the quarter with good results in non-measured channels. Growth was driven by the Pringles core care, grab and go and the new Tortilla Pringles. The productivity planned for both the fourth quarter and the first quarter of next year and optimistically going to future growth for this great brand in the U.S. and around the world. Obviously, we aren't unhappy with the performance of our snack business. Pringles, the cracker business and the core cookie business are performing well, although we've continued to see underperformance in some areas, and in the wholesome snack business, specifically. We are increasing investment in our snack business and are developing plans to drive improvement, as we get into 2015. Now let's turn to Slide 26 in the U.S. Specialty segment. Internal net sales decreased by 4.1% in the quarter. This was driven by capacity issues and then copackers, and then inventory dealer is a customer shifted from warehouse to direct delivery. It is important to note that these issues are now behind us, although they had a significant impact on results for the quarter. Excluding them, we saw net sales growth driven in part by good results in innovation. Elsewhere in the business, we saw a strong response to innovation in the K-12 school business in Foodservice as we've introduced wholegrain Rice Crispy Treats, new toaster pastries, new Cheez-It crackers and Eggo Pop Chips for the back-to-school period. We've done well in cereal and snacks and have gained share in the waffle, pancake and toasted pastry segment. In the convenience business, we achieved share growth in hot cereal, salty snack and cracker segments. Kellogg posted double-digit consumption growth in the salty snack category, as a rate more than twice that at the category[indiscernible]. And we again saw a decline in sales in custard segment as we exited some less profitable businesses. Overall results in the Specialty Channels business was disappointing in the third quarter, and with the result of the issues I mentioned. Our expectations our better results in the fourth quarter. Slide 27 shows the performance of the North America Other segment, which include the U.S. Frozen Foods and Canadian businesses. Overall, this segment posted an internal sales decline of 1.1% in the quarter. The Frozen Foods business posted a slight decline in internal net sales in the quarter, although volumes increased in a low single-digit rate. The net sales performance was a result of mix and costs associated with launch of new products. New Eggo Bites continue to do well in the quarter and we just began the launch of new Eggo handheld sandwiches in September. Obviously, it's still very early, but initial indications are that it's being well received. And we're also excited to be relaunching the Leggo My Eggo brand building program in the fourth quarter as well. Net sales also declined slightly in the Canadian business in the quarter, although we saw good results in the frozen food business and the snack business. In addition, the consumption of Pringles increased at double-digit rate in the latest quarterly data as the launch of Tortilla Pringles has also gone very well in Canada. In 2014 in Canada, where we executed our cereal and milk program, well[ph], we saw a good response. And we have a heightened focus on processing with both Special K cereal and handheld sandwiches planned for 2015. In addition, we've got new activity planned for All-Bran, Froot Loops and [indiscernible], and we've got other innovations scheduled for launch between Kashi cereal and snacks. Let's turn to Slide 28 in our European business. Net sales in the region declined by 0.6% in the third quarter. The snacks business performed well, largely due to good results from Pringles, which was offset by declines in the cereal business. The performance posted by individual countries was largely as expected, except for a shortfall in Germany, driven by changes to the commercial schedule. The most significant challenge in the region remains the performance of the Special K brand. As we mentioned earlier, we have initiatives intended to address this performance planned for 2015, including new communication, an upgrade to the food, improvement in packaging and better promotional activities. In the U.K., our cereal programs are showing early signs of success. The parent brand, origins program, and the back-to-school themes program, both achieved good retail support and execution. In addition, we are making progress in the rollout of breakfast stations, which includes cereal cups. Offsetting this growth was the continuing deflationary environment in the U.K. As a result, we are focused on improving both mix and the effectiveness of promotions. And finally, for the European business. The Pringles business posted mid-single digit net sales growth in the third quarter. This continued strong performance was driven by our focus on improving availability, visibility and awareness. Investment and brand building for Pringles increased in a double-digit rate. We saw good results from the summer speaker camp promotion, with outstanding execution of retail. Growth was broad-based across all markets. Slide 29 shows the performance of our Latin American business. We posted 7.3% net sales growth in the quarter. This was a result of growth in Venezuela, Mexico and [indiscernible] business. The cereal business in Latin America posted good results in the third quarter, where we saw some competitive price promotions in Mexico, which was better than chocolate and all family segments later in the period. We saw some share gains in Q2 in the Colombian and Venezuelan business. And in Mexico, we're implementing parent brand programs, supporting the relaunch of Choco Krispies and All-Bran and beginning a nutrition related initiative. The underlying momentum of the Pringles business continues, driven by strong commercial programs, innovation and great execution. And the wholesome snack business is driving share growth, despite the slowdown in category in Mexico and Puerto Rico. We expect to continue good sales growth in Latin America in the fourth quarter and we will again increase investment in brand building in the double-digit range. We have granola and Muesli launching in parts of the region in the fourth quarter. We have parent brand programs continuing as well, and we have a lot more activity scheduled to begin in the first quarter of 2015. Now let's turn to Slide 30 and our Asia-Pacific business. Asia-Pacific posted strong results in the third quarter. Net sales increased by 5%, both the Asian and Pringles businesses posted double-digit net sales growth in the quarter. Net sales in Australia declined in the quarter, although this represented a sequential improvement from the results posted in the first half of the year. Performance in the third quarter benefited from the timing of promotion, innovation and the Breakfast for Better Days current brand activity. Consumption in the cereal category in Australia, however, continued to be under pressure during the period. The sales decline in Australia was more than offset by the double-digit growth in the Asian and Pringles businesses. Net sales in India increased in the double-digit rate and the business appears to have rebounded from a macro economic-driven weakness we saw earlier in the year. In addition, the Japanese business also posted double-digit net sales growth, driven by a continued strong performance of granola. So we had a good quarter in the Asia Pacific region and we're optimistic we're growing the potential for this business, as we enter 2015. So finally, let's turn to Slide 31 and the summary. The third quarter's earnings per share and operating profit were ahead of our expectation and we're maintaining our guidance for the year. And we're also making the right calls in a difficult environment. We are seeing strong growth from our acquisitions of Pringles. We continue to execute Project K well. It will provide us with the tool we need for growth over the next few years. We have invested in the U.S. sales organization in both warehouse and networks. And we continue to invest in creating food that is on trend. And we will continue to invest in our great brands over time. We know that these are the right actions, although we also know that sustainable improvement will take time. These Kellogg employees are making a difference every day. They are driving the efficiencies, generating the ideas and executing the plans necessary for improvement in the years to come. So as always, I'd like to end by thanking them for all their hard work. And with that, I'll open up for questions.

[Operator Instructions] And the first question comes from David Hayes with Nomura. David Hayes - Nomura Securities Co. Ltd., Research Division: I should just keep to one question, as requested. So just on A&P spend. Obviously, you talked A&P at group level being slightly down year-on-year in the quarter. I was just wondering if you could be a little bit more specific about the extent of what is slightly down. And then, tying that into the Morning Foods category, I wonder if you can be more specific about the A&P profile in the quarter in that category. And I guess the reason I'm driving into that is because with the change of management with Paul coming across and then the Kashi management changes as well. I wonder whether there was a delay to some extent in the brand communication support and that you catch that up in the fourth quarter, which then leads to the question, does the fourth quarter see an uplift year-on-year on the A&P spend. Ronald L. Dissinger: David, it's Ron. Yes, in terms of our A&P spend year-over-year, our brand building essentially was down in line with the decline in sales. So what I said in the prepared remarks was that as a percent to sales, our brand building was comparable year-over-year. So a little less than 2 points of decline. Now specifically in Morning Foods, we increased our A&P at a high single-digit rate. So we've invested behind the category building programs that we intended to invest behind in the quarter.

And the next question comes from Ken Goldman with JPMorgan. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Are there any indications from your perspective that the heavy promotional environment we've seen across food is abating at all? I was at a Kroger store tour yesterday. I can't recall ever seeing so many yellow sale signs up at the same time. So I'm guessing not, but I'm just hoping to pick your brain a little bit on whether there's any light at the end of the tunnel here. John A. Bryant: Ken, as I look at the categories that we operate in, we operate in categories that are always intensely competitive. I don't think we're seeing a big increase in the promotional activity within the categories in which we operate. However, I think there are a number of other categories in the food area that have been seeking more merchandising support. And that is providing more -- a broader competition for the same amount of real estate in store. And so, as a result, I think we are seeing a little less performance than we'd like to see from our merchandising activity in-store. Kenneth Goldman - JP Morgan Chase & Co, Research Division: And as you talk to -- just a follow-up. As you talk to your customers about that -- and again, maybe it's not in your categories so it's harder to see. But is there any indication that it gets better from here or just more of the same as we go, given the struggles across center store? John A. Bryant: I can't think everyone is growth of the U.S. and expect the pressure to continue to be there on merchandising. Our solution to that is to invest back into our sales organization and take more of our future into our own hands. We're doing that by investing back in our DSP organization this year, adding additional reps. And reintroducing the warehouse reps on the cereal side, which will probably have more impact in the '15 than in '14. But ultimately, we realize that we have the responsibility to create that entertainment in store, as well as working with our retail partners.

And the next question comes from Andrew Lazar with Barclays. Andrew Lazar - Barclays Capital, Research Division: John, you've used the words this morning, no quick fix on the cereal side several times, and that's certainly consistent with your previous comments as well. And you're certainly not ready to go into detail on 2015 yet. But I guess on the spirit of your comments, it would seem like our expectation ought to be that the ramped up savings that start to come from Project K next year are likely needed for reinvestment rather than, let's say, a whole bunch of it dropping to the bottom line next year. Particularly given all the new items you have coming in '15, would you say that's more directionally a fair comment at this stage? John A. Bryant: Andrew, just say, I'd rather not give 2015 guidance until we get to the fourth quarter conference call. If I sit back and look at our company, the key thing that we need to do is to return the company to top line growth. Our sales are down 1% to 2% this year on internal basis. Quite frankly, in the current environment, we only need sales growth of plus 1% to 2% to make our economic algorithm work. And so we are focused on doing that and Project K is a big enabler to enable us to invest back in the business, whether it be back into our sales organization in the U.S., back into improving our foods, so it's even more on trend. We're changing consumer views of health and wellness, and investing back in brand building, although recognizing that we have $1.5 billion of brand building already so we have quite a bit of fuel in the engine. So I appreciate the question, but I'll defer until the fourth quarter call to give more specific guidance on 2015.

And the next question comes from Robert Moskow with Credit Suisse. Robert Moskow - Crédit Suisse AG, Research Division: I guess my major concern about the cereal category and I guess other carb snacks in the portfolio is consistent with what you've said, John, is that consumers attitudes towards carbs and the mix of carbs in their diet is changing against you. And it just seems like every dietitian, nutritionist and athlete is talking about reducing carbs. So I guess, I'm asking, is it unrealistic to assume that the cereal category and you have the resources to change those attitudes or at least educate people on balance between carbs and protein? There's nothing evil about carbs. But with all of these experts saying one thing, what can the cereal category do to kind of -- to change that? John A. Bryant: Robert, I think if you step back and look at the food industry, there's a lot of fads and trends that go through the food industry at any point in time. Clearly, some of those items out there right now are not helpful to the cereal category, whether it be carbs or gluten-free or some of the other ones that are out there. What we need to do is to continue to provide foods that are more on trend with some of those beliefs, and also to communicate to people some of the great benefits that our foods have. Our foods are very simple, a corn flake is essentially corn being rolled and toasted and Rice Krispies just rice that's been puffed. Talk about the simplicity of the foods, talk about the healthy elements of the food, whether it be fiber or whole grain, et cetera. So I think we have an opportunity to talk about the benefits of the food more. Also the foods that have been more on why would some of those changing trends and continue to work to help consumers understand the benefits of the food. So I don't believe it's beyond our ability to improve on the current environment. I would say that I'd be cautious on the speed of that improvement, as we look out into 2015.

And the next question comes from Bryan Spillane with Bank of America. Bryan D. Spillane - BofA Merrill Lynch, Research Division: I got a question about just gross margins and gross profits. And I guess really 2 parts to it. One is, could you give us some sort of context around how much volume deleveraging right now is weighing down on gross profits and gross margins. Trying to just get a sense of what -- how that's affecting the base and as you improve volume growth, what type of leverage that are maybe on that. And then the second part is just looking out over the next few years as you get through the supply chain improvements that you're making. Is there a sense that gross margins can get back into kind of the low 40s levels, where they had been historically? Or is there something else that might impede that ability to get gross margins back up to closer to historical levels? Ronald L. Dissinger: Sure, Brian, it's Ron. So in terms of our gross margin expectations, we've said when we launched Project K that the initiatives we would undertake in association with Project K could improve our gross margins by about 150 basis points over that 4-year period. And we still believe that obviously, there are a number of other things that could impact us over that 4-year period, including significant commodity deinflation, not suggesting that that's going to occur, but obviously, that's a factor. So we do have a goal, as you look at our sustainable growth model as well as to improve our gross margins over time so that we can invest back in brand building and innovation. In terms of the fixed cost absorption impact from deleveraging a bit on terms of volume, it's not significant in terms of impact to our full year gross margin. We have now said that our gross margin will be flat to down slightly. Previously it was flat to up slightly. Distribution costs are also a factor in there, though, Bryan. Bryan D. Spillane - BofA Merrill Lynch, Research Division: So just to be clear, there's nothing that's really changed since you announced -- initiated Project K that would sort of change your gross margin sort of goals longer-term? Ronald L. Dissinger: That's correct.

And the next question comes from David Driscoll with Citi Research. David C. Driscoll - Citigroup Inc, Research Division: Guys, I think you said that the 2014 inflation would be positive and it's in line with your initial expectations, but that the second half of '14 would be more favorable than the front half. And then, moving into 2015, Ron, I think you said in your script you used the word benign. I kind of take that as 0. Big picture are we finally kind of entering the tipping point, where cost savings are well ahead of the inflation? And how will you spend the net savings? Ronald L. Dissinger: So David, our cost savings in 2014 are ahead of inflation for the full year. I said for the full year, we do expect slight net deflation. And as I've said all along this year, that net deflation is more pronounced, obviously, in the second half of the year. So we saw a little bit of net deflation in the third quarter, and a little bit of net deflation in the fourth quarter as well, and that's helping us to manage our guidance from an operating profit standpoint. David C. Driscoll - Citigroup Inc, Research Division: Can you make a comment on '15, given you're mentioning that this inflation was benign? So that's more favorable than what's been going on? I mean, it's -- and I mean, I don't want to read too much in this, but is that accurate? Ronald L. Dissinger: Well, so from a material inflation standpoint, what I said was it's more benign. I think the thing to remember, David, is there are a number of other things that can impact our inflation or cost structure. That includes transportation and logistics cost. It includes factory costs as well. So I prefer to give you more robust guidance when we get down to the fourth quarter call. But for now, what we're seeing is a relatively benign commodity inflation. David C. Driscoll - Citigroup Inc, Research Division: We're watching oil plummet. So I feel like that sounds like it should be a fun call in the fourth quarter. I'll leave it there and pass it on.

And the next question comes from David Palmer with RBC. David Palmer - RBC Capital Markets, LLC, Research Division: Your European segment margin, it's been pretty steady this year, around the 12% area. That's obviously a nice improvement year-over-year and perhaps fueled in part by still getting synergies out of Pringles. Where do you see that division margin going over time? Can you continue to drive margins meaningfully higher with similar revenue trends? Ronald L. Dissinger: So we have had good performance in our European margin this year. Input costs are a factor there. We've seen lower input cost versus prior year and in addition, very strong productivity savings. Obviously, we have a goal to grow our Europe operating margins over time. We haven't cited specifically a goal at this point in time, but we do believe there's opportunity for improvement in those margins. David Palmer - RBC Capital Markets, LLC, Research Division: And then just separately, one more. On Kashi, are you getting any positive responses on the specific SKUs where you're reformulating the product in -- from the consumer or the trade? Does it feel like there's a turn coming with that brand, either in velocity or shelf space? John A. Bryant: As with Kashi, we are getting some positive responses from retailers about putting Kashi back in California, putting a dedicated team around it. And retailers are very excited to work with us to get that business back into growth. Having said that, we have seen some disruption losses through the year on Kashi. And unfortunately, that's going to continue to weigh upon that business, even as we go into 2015. I think it's going to take some time as we take that brand more broadly, GMO free, and we have some additional USDA organic SKUs coming in. But I don't think renovating the food alone is going to be enough. I think we're going to bring out some new innovation, bring out some new foods and truly get on the front edge, leading edge of pioneering nutrition. We have a new team that's tremendously excited to do that. A lot of energy around this. But unfortunately, it's going to take some time for us to see improved trends in the Kashi business.

And the next question comes from Eric Katzman with Deutsche Bank. Eric R. Katzman - Deutsche Bank AG, Research Division: Sorry, but a couple of questions. I guess, first, Ron, your annual target this year implies an $0.08 range. Can you just talk a little bit about what would put you, for the fourth quarter, either at the high end or the low end of that? Ronald L. Dissinger: Sure, Eric. I mean, obviously, our business is very sensitive to top line performance. So if there's anything that's going to drive towards the high end or the low end of that range, it's going to be top line performance. Eric R. Katzman - Deutsche Bank AG, Research Division: Okay. And then second question, maybe for John. The -- how much -- I think this is -- maybe it's the second quarter or third quarter in a row, where Pop-Tarts have been down materially. It's 80% share, it's got to be one of your most profitable businesses. Like how much of that is playing a role in kind of the morning or even North American profits being under pressure? And kind of what gives you the confidence that, that business, which I think by your -- as you've stated before, has been up for something like 40 years in a row? What should give us the confidence that, that can rebound? John A. Bryant: Eric, as you say, Pop-Tarts is a great business. It's been a long-term growth. The last 2 quarters, we have been soft in Pop-Tarts, largely because in the prior-year period, we were very strong behind the peanut butter launch, as we got tremendous in-store display and execution. This year, our Pop-Tarts innovation is more later in the year. Sort of a peanut butter and jelly Pop-Tart coming out in the fourth quarter, which we expect to hear some good support behind as well. So it really had to do with comparisons. If you were to go back and compare it to the business 2 years ago, it's still doing reasonably well. So it's really a year-on-year comp issue. Eric R. Katzman - Deutsche Bank AG, Research Division: Okay. And then, sorry, the last question. You've been very public through most of this year about the problems with Special K and Kashi. And obviously, you're about to, it sounds like, completely redo the brand. So is this kind of transition period here-- Like, does that explain the fact that, that business sounds like it's just been kind of as it currently stands, falling off a cliff and responsible for so much of the underperformance in the North America operation? John A. Bryant: I think we're clearly struggling with Special K in the U.S. this year. But quite frankly, Special K in all of the large markets has been -- developed markets, has been struggling. What's happening there is, we have communicated Special K around dieting, lose weight over a 2-week period and we really need to move that to a weight wellness discussion, really away from reduced calories to the food itself has tremendous nutrient benefits. That requires us to change their communications, to focus on that, but also to make some food improvements, which is what we're doing in cereal, in Special K bars, in cracker chips. And until we get some of that new food out there, while the communication shift will help us, really the competition shift in combination with the food in combination with new consumer promotions and packaging, that whole relaunch element was required to get the excitement around the brand, to drive reappraisal, to bring people back into what is a tremendous franchise. I think the softness we're seeing in the third quarter is greater than we've seen year-to-date, But quite frankly, we've seen the softness through the first half of the year as well.

And the next question comes from Jason English with Goldman Sachs. Jason English - Goldman Sachs Group Inc., Research Division: So John, I appreciate that you're a cereal company at your core, but you've assembled a pretty formidable snack business over the years. Cereal category's clearly soft across a number of your markets? And John you seem to suggest this is driven by a fad or trend that may just need to run its course. Meanwhile, snack's a growth year. So I see your slide on plans for 2015. It looks like around 90% of these initiatives you detail adhere to breakfast. And I hear you talking about curtailing brand building overall, but ramping at high single digits in Morning Foods. So my question is why are these the right investment priorities? I'm not suggesting you put cereal in outright harvest mode? But why isn't every incremental dollar going to your snack portfolio to turn that around and ride the wave that's in front of you now? John A. Bryant: Jason, a great question. We have 45% cereal, 45% snacks today. And as we look at the 2015 plans, while the slide might suggest more of a focus on cereal, in reality we are investing back in both of our businesses and we have some brands that actually cross both businesses. So the investment in Special K and cereal actually also helps the snacks business as well. So as we look at the cereal business, look at 2015, we're going to continue to invest in the cereal business. But I wouldn't want you to believe that we are going to disproportionately invest back into the cereal business. We'll be investing back behind growth in Pringles. We're investing back behind the growth we're seeing in that cracker portfolio in the U.S. And so we have some great growth opportunity as we go forward here. So I'd say it's a balanced investment in growth across the portfolio.

And the next question comes from Diane Geissler from CLSA. Diane Geissler - CLSA Limited, Research Division: I wanted to ask about takeaway versus shipments. I appreciate it's been challenging in the grocery aisles with increased merchandising from categories that traditionally haven't received as much merchandising support from the retailers. So could you just talk about, particularly within North America, and in your key categories, what you're seeing shipments versus consumer take away? John A. Bryant: Looking in the U.S. DST system is normally-- shipments in consumption tend to marry up pretty closely. So I wouldn't say there's anything to flag there. I think on Frozen Foods maybe a little bit of shipment ahead of consumption as we launch some new products. But we feel good about the programs we have there. And then on cereal, we ended the quarter with a little bit more inventory than last year but we expect to end the year with the same amount of inventory as we had last year.

And the next question comes from Alexia Howard with Sanford Bernstein. Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division: Can I ask about -- actually following on from Jason's question about where to allocate resources. Is there a broader question about portfolio shift here that is about maybe trying to acquire or increase your exposure to snacks, which is a growth category over time, both in the U.S. and globally? And maybe deemphasizing the cereal category really depends on how structurally challenged you believe the cereal category is? But how do you think about portfolio shift over the longer term? John A. Bryant: Alexia, I think if you go back over the last decade or so, we've taken the company from being 70% cereal to 45% cereal, 45% snacks. That's been driven by both the Keebler acquisition, as well as the Pringles acquisition. And as you look at the growth strategy for the company going forward, we have 4 growth platforms. One is to continue to grow our breakfast business around cereal. The second is to continue with our snacks business. The third is to grow our Frozen Foods business here in North America. And the fourth one is to continue to expand our emerging market platform. As you think about our growth priorities going forward, clearly snacks is an important growth priority for us, and we'll continue to expand that over time. And that may intersect also that emerging market growth objective as well. So we'd expect us to continue to grow our snacks business. However, I wouldn't see this as an alternative. We have to grow cereal or snacks. I think it's an add strategy, we can do both. Clearly, it's not the right thing to do, to only invest disproportionally in one versus the other. We already spent a lot of money in brand building in cereal. In fact, the reason the company has a high percentage of sales in brand building is because the cereal category is one of the most brand building intensive categories in the food industry. So there's a lot of a brand building investment already behind cereal. And the key there is to sustain that investment that and to continue to improve the quality of ideas and execution, and bring those foods increasingly on trend with what consumers are looking for. On snacks, we have an opportunity to keep growing that business over time. I'm excited by our growth in snacks, particularly since Pringles acquisition, which has truly ignited the international snack growth opportunity that we have as a company.

And that question comes from John Baumgartner with Wells Fargo. John J. Baumgartner - Wells Fargo Securities, LLC, Research Division: John, I wanted to touch on North America, and you reported a negative price mix there for the segment in Q3, and I think appreciatively negative. And just on your history that's pretty unusual. So just wondering if maybe you can elaborate on that in terms of, is there anything one-time in there or any sub-segment driving that impact? Or even if it's just -- we should consider that going forward as sustainable? Ronald L. Dissinger: There's a little bit of business mix in there. So for example, wholesome snacks is down. That has an impact on our mix of performance. John also commented on within the North America Other segment, which includes Canada and Frozen Foods, some cost to launch new product and there was a little bit of channel mix in there as well. And then we also talked about the effectiveness or efficiency of trade investment John talked briefly about merchandising. So those are the items that are impacting us specifically in this quarter, John. John A. Bryant: I think, over time, we would not like to see negative price mix in the North American segment. John J. Baumgartner - Wells Fargo Securities, LLC, Research Division: Okay. So this is more of a temporary issue then? John A. Bryant: I think it has more to do with the timing of some innovation launches in some of our products. And also, just as Ron said, some business mix. If you're looking at each individual business, you wouldn't necessarily get the same pattern as if you look at a consolidated segment.

Okay, everyone, thanks for joining us today. We appreciate it. We'll be around the next couple of days for any follow-ups.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Have a nice day.