-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BTH6CSsyNwimToHpI6PeCthkHw3NA2fOq35ccGTvwi0Dcfeh35Um92y0WeP8RQov UayFasu+U7NaJR6IciNkrw== 0000950124-96-001400.txt : 19960401 0000950124-96-001400.hdr.sgml : 19960401 ACCESSION NUMBER: 0000950124-96-001400 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KELLOGG CO CENTRAL INDEX KEY: 0000055067 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 380710690 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04171 FILM NUMBER: 96540568 BUSINESS ADDRESS: STREET 1: ONE KELLOGG SQ STREET 2: P O BOX 3599 CITY: BATTLE CREEK STATE: MI ZIP: 49016 BUSINESS PHONE: 6169612000 MAIL ADDRESS: STREET 1: ONE KELLOGG SQUARE STREET 2: P O BOX 3599 CITY: BATTLE CREEK STATE: MI ZIP: 49016 10-K 1 FORM 10-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 1-4171 --------------------------- KELLOGG COMPANY (Exact Name of Registrant as Specified in its Charter) DELAWARE 38-0710690 State of Incorporation I.R.S. Employer Identification No. ONE KELLOGG SQUARE BATTLE CREEK, MICHIGAN 49016-3599 (Address of Principal Executive Offices) REGISTRANT'S TELEPHONE NUMBER: (616) 961-2000 --------------------------- Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered: COMMON STOCK, $0.25 PAR VALUE PER SHARE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE --------------------------- Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / The aggregate market value of the common stock held by non-affiliates of the registrant (assuming only for purposes of this computation that directors and executive officers may be affiliates) was $16,493,839,991 as determined by the March 1, 1996 closing price of $77 for one share of common stock on the New York Stock Exchange. As of March 1, 1996, 215,103,803 shares of the common stock of the registrant were issued and outstanding. Portions of the registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1995, are incorporated by reference into Part II and Part IV of this Report. Portions of the registrant's definitive Proxy Statement, dated March 13, 1996, for the Annual Meeting of Stockholders to be held April 19, 1996, are incorporated by reference into Part III of this Report. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS The Company. Kellogg Company, incorporated in Delaware in 1922, and its subsidiaries are engaged in the manufacture and marketing of ready-to-eat cereal and other convenience food products on a worldwide basis. The address of the principal business office of Kellogg Company is One Kellogg Square, P.O. Box 3599, Battle Creek, Michigan 49016-3599. Unless otherwise indicated by the context, the term "Company" as used in this report means Kellogg Company, its divisions and subsidiaries. Principal Products. The principal products of the Company are ready-to-eat cereals and other convenience food products which are manufactured in 20 countries and distributed in nearly 160 countries. Ready-to-eat cereals are marketed under the KELLOGG'S(R) name and are sold principally to the grocery trade through direct sales forces for resale to consumers and through broker and distribution arrangements in less developed market areas. Other Convenience Food Products. In the United States and Canada, in addition to ready-to-eat cereals, the Company produces or processes and distributes toaster pastries, frozen waffles and cereal bars. The Company also markets a variety of other convenience food products in various locations throughout the world. Raw Materials. Agricultural commodities are the principal raw materials used in the Company's products. World supplies and prices of such commodities are constantly monitored, as are government trade policies. The cost of raw materials used may fluctuate widely due to government policy and regulation, weather conditions or other unforeseen circumstances. Continuous efforts are made to maintain and improve the qualities and supplies of raw materials for purposes of the Company's short-term and long-term requirements. The principal ingredients in the products produced by the Company in the United States include corn grits, oats, rice, various fruits, sweeteners, wheat and wheat derivatives. Ingredients are purchased principally from sources in the United States. In producing toaster pastries and frozen waffles, the Company may use dairy products, eggs, fruit and other filling ingredients, flour, shortening and sweeteners, which ingredients are obtained from various sources. Although the Company enters into some long-term contracts, the bulk of such raw materials are purchased on the open market. While the cost of raw materials may increase over time, the Company believes that it will be able to purchase an adequate supply of such raw materials as needed. The Company also uses commodity futures and options to hedge some of its raw materials costs. See Note 11 to the Consolidated Financial Statements contained in the Company's Annual Report for the fiscal year ended December 31, 1995 which Note is incorporated by reference in Item 8 of this Report. Raw materials and packaging needed for internationally based operations are available in adequate supply and are sometimes imported from countries other than those where used in manufacture. Cereal processing ovens at major domestic and international facilities are regularly fueled by natural gas or propane obtained from local utilities or other local suppliers. Short-term standby propane storage exists at several plants for use in the event of interruption in natural gas supplies. Additionally, oil may be used to fuel certain plant operations in the event of natural gas shortages at various plants or when its use presents economic advantages. Trademarks and Technology. Generally, the Company's products are marketed under trademarks owned by the Company. The Company's principal trademarks are its housemark, brand names, slogans and designs related to cereals and other convenience food products manufactured and marketed by the Company. These trademarks include Kellogg's(R), for cereals and other products of the Company and the brand names of certain ready-to-eat cereals, including All-Bran(R), Kellogg's Squares(TM), Apple Jacks(R), Apple Raisin Crisp(R), Apple Cinnamon Rice Krispies, Bran Buds(R), Complete(R) Bran Flakes, Cocoa Krispies(R), Common Sense(R), Cruncheroos(TM), Kellogg's Corn Flakes(R), Cracklin' Oat Bran(R), Kellogg's(R) Cinnamon Mini-Buns, Crispix(R), Double Dip Crunch(R), Froot Loops(R), Kellogg's Frosted Bran(R), Kellogg's Frosted Flakes(R), Frosted Krispies(R), Frosted Mini-Wheats(R), Fruitful Bran(R), Fruity Marshmallow Krispies(R), Just Right(R), Kellogg's(R) Low Fat Granola, Nut & Honey Crunch(R), Nut & Honey Crunch O's(R), Mueslix(R), Nutri-Grain(R), Pops(R), Product 19(R), Kellogg's(R) Raisin 2 3 Bran, Rice Krispies(R), Rice Krispies Treats(R), Smacks(R), Special K(R) and Pop-Tarts Crunch(TM). Additional Company trademarks are the names of certain combinations of Kellogg's(R) ready-to-eat cereals, including Handi-Pak(R), Snack-Pak(R), Fun Pak(R), Jumbo(R) and Variety(R) Pak. Other Company brand names include Kellogg's(R) Corn Flake Crumbs; Croutettes(R) for herb season stuffing mix; Kellogg's(R) Nutri-Grain(R) for cereal bars; Pop-Tarts(R) for toaster pastries; Eggo(R), Special K(R) and Nutri-Grain(R) for frozen waffles; and Pop-Tarts Minis(TM) for pastry snacks. Company trademarks also include depictions of certain animated characters in conjunction with the Company's products, including Snap!(R) Crackle!(R) Pop!(R) for Kellogg's(R) Frosted Krispies(R), Fruity Marshmallow Krispies(R) and Rice Krispies(R); Tony the Tiger(R) for Kellogg's Frosted Flakes(R); Toucan Sam(R) for Froot Loops(R); Dig 'Em!(R) for Smacks(R); Coco(TM) for Cocoa Krispies(R); and Cornelius(TM) for Kellogg's Corn Flakes(R). The slogans "The Best To You Each Morning"(R), and "They're GR-R-REAT!"(R) used in connection with the Company's ready-to-eat cereals, are also important Company trademarks. The Company's use of the advertising theme "Get A Taste For The Healthy Life"(TM) represents part of its effort to establish throughout the United States and the world the concept of a nutritious breakfast. The Company considers that, taken as a whole, the rights under its various patents, which expire from time to time, are a valuable asset, but the Company does not believe that its businesses are materially dependent upon any single patent or group of related patents. The Company's activities under licenses or other franchises or concessions are not material. Seasonality. Demand for the Company's products is approximately level throughout the year. Working Capital. Although terms vary around the world, in the United States the Company requires payment for goods sold eleven days subsequent to the date of invoice, with a 2% discount allowed for payment within ten days. Receipts from goods sold, supplemented as required by borrowings, provide for the Company's payment of dividends, capital expansion and for other operating expenses and working capital needs. Customers. The Company is not dependent on any single customer or a few customers for a material part of its sales. Products of the Company are sold through its own sales forces and through broker and distributor arrangements and are generally resold to consumers in retail stores, restaurants and other food service establishments. Backlog. For the most part, orders are filled within a few days of their receipt and are subject to cancellation at any time prior to shipment. The backlog of any unfilled orders at any particular time is not material to the Company. Competition. The Company has experienced intense competition for sales of all of its principal products in its major markets, both domestically and internationally. The Company's products compete with advertised and branded products of a similar nature as well as unadvertised and private label products, which are typically distributed at lower prices, and generally with other food products with different characteristics. Principal methods and factors of competition include, among others, new product introductions, product quality, composition and nutritional value, price, advertising and promotion. Research and Development. Research to support and expand the use of the Company's existing products and to develop new food products is carried on at the Company's research laboratories and pilot plant facilities in Battle Creek, Michigan, and at other plant locations around the world. The Company's expenditures for research and development were approximately $72.2 million in 1995, $71.7 million in 1994 and $59.2 million in 1993. Environmental Matters. The Company's facilities are subject to various foreign, federal, state and local laws and regulations regarding the discharge of material into the environment and the protection of the environment in other ways. The Company is not a party to any material proceedings arising under these regulations. The Company believes that compliance with existing environmental laws and regulations will not materially affect the financial condition or the competitive position of the Company. The Company is 3 4 currently in substantial compliance with all material environmental regulations affecting the Company and its properties. Employees. At December 31, 1995, the Company had approximately 14,487 employees. Segment and Geographic Information. The Company operates in a single industry, which is the manufacture and marketing of convenience food products throughout the world. Net sales and operating profit for the years 1995, 1994, and 1993, and identifiable segment assets and corporate assets, consisting principally of cash and cash equivalents, at the related year-ends are presented in Note 13 of the Consolidated Financial Statements captioned "Operating segments" and incorporated by reference in Item 8 of this Report. ITEM 2. PROPERTIES The Company's corporate headquarters and principal research and development facilities are located in Battle Creek, Michigan. The Company operates manufacturing plants and warehouses totalling more than ten million (10,000,000) square feet of building area in the United States and other countries. The Company's plants have been designed and constructed to meet its specific production requirements, and the Company periodically invests money for capital and technological improvements. At the time of its selection, each location was considered to be favorable, based on the location of markets, sources of raw materials, availability of suitable labor, transportation facilities, location of other Company plants producing similar products and other factors. Manufacturing facilities of the Company in the United States include four cereal plants and warehouses located in Battle Creek, Michigan; Lancaster, Pennsylvania; Memphis, Tennessee; and Omaha, Nebraska. Other of the Company's convenience foods are also manufactured in the United States at various plant locations. Outside the United States, the Company has additional manufacturing locations, some with warehousing facilities, in Argentina, Australia, Brazil, Canada, China, Colombia, Denmark, Germany, Great Britain, Guatemala, India, Italy, Japan, Latvia, Mexico, South Africa, South Korea, Spain and Venezuela. A new cereal plant in Thailand is currently under construction and is expected to commence operation in 1997. The principal properties of the Company, including its major office facilities, are held in fee and none is subject to any major encumbrance. Distribution centers and offices of non-plant locations typically are leased. The Company considers its facilities generally suitable, adequate and of sufficient capacity for its current operations. ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any pending legal proceedings which, if decided adversely, would be material to the Company on a consolidated basis, nor are any of the Company's properties or subsidiaries subject to any such proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 4 5 ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT The names, ages as of March 1, 1996 and positions of the executive officers of the Company are listed below together with their business experience. Executive officers are elected annually by the Board of Directors at the meeting immediately following the Annual Meeting of Stockholders. EXECUTIVE OFFICERS Arnold G. Langbo Chairman of the Board, President and Chief Executive Officer..................58 Mr. Langbo has been employed by the Company and certain of its subsidiaries since 1956. He was named President and Chief Operating Officer in 1990 and became Chairman of the Board and Chief Executive Officer in 1992. William A. Camstra Executive Vice President, President -- Kellogg Latin America..................63 Mr. Camstra has been employed by the Company and certain of its subsidiaries since 1956. He was named Executive Vice President of the Company in 1992 and President, Kellogg Latin America in 1994. Donald G. Fritz Executive Vice President, President -- Kellogg Europe.........................48 Mr. Fritz joined Kellogg Canada Inc. in 1979. He was named Executive Vice President of the Company in 1992, and President, Kellogg Europe in 1994. Carlos M. Gutierrez Executive Vice President, President -- Kellogg Asia-Pacific...................42 Mr. Gutierrez joined Kellogg de Mexico in 1975. In 1993, Mr. Gutierrez was promoted to Executive Vice President, Kellogg USA and General Manager, Kellogg USA Cereal Division. He was appointed Executive Vice President of the Company and President, Kellogg Asia-Pacific in 1994. Thomas A. Knowlton Executive Vice President, President -- Kellogg North America..................49 Mr. Knowlton joined Kellogg Canada Inc. in 1980. He was named Executive Vice President of the Company in 1992 and President, Kellogg North America in 1994. Donald W. Thomason Executive Vice President -- Corporate Services and Technology.................52 Mr. Thomason has been employed by the Company since 1966. He was named Executive Vice President -- Corporate Services and Technology in 1990. Richard M. Clark Senior Vice President, General Counsel and Secretary..........................58 Mr. Clark joined the Company as Senior Vice President, General Counsel and Secretary in 1989. John R. Hinton Senior Vice President -- Administration and Chief Financial Officer...........50 Mr. Hinton joined the Company as Assistant to the Vice President -- Finance in 1979. He was appointed Executive Vice President -- Financial Administration and Treasurer for Kellogg USA Inc. in 1993. In July 1995, Mr. Hinton was named Senior Vice President -- Administration and Chief Financial Officer. Robert L. Creviston Senior Vice President -- Human Resources......................................54 Mr. Creviston joined the Company as Vice President -- Employee Relations in 1982. He was named Senior Vice President -- Human Resources in 1991. Daryl R. Schaller Senior Vice President -- Scientific Affairs...................................52 Dr. Schaller has been employed by the Company since 1972. He was named Senior Vice President -- Research, Quality and Nutrition in 1990, and Senior Vice President -- Scientific Affairs in 1994. 5 6 Jay W. Shreiner Senior Vice President and Chief Information Officer...........................46 Mr. Shreiner joined the Company as Assistant Treasurer in 1983. In 1990, he was named Vice President -- Information Services and was named Senior Vice President and Chief Information Officer in May 1995. Joseph M. Stewart Senior Vice President -- Corporate Affairs....................................53 Mr. Stewart has been employed by the Company since 1980. He was named Senior Vice President -- Corporate Affairs in 1988. Michael J. Teale Senior Vice President -- Worldwide Operations and Technology..................51 Mr. Teale joined Kellogg Company of Great Britain Limited in 1966. In 1990, he was named Vice President -- Cereal Manufacturing of the Company's U.S. Food Products Division, and in 1994, he was named Senior Vice President -- Worldwide Operations and Technology. Alan Taylor Vice President and Corporate Controller.......................................44 Mr. Taylor has been employed by the Company and certain of its subsidiaries since 1982. He served as Director -- Finance of Kellogg (Aust.) Pty. Ltd. from 1988 until 1993. He became Controller of the Company in 1993, and was named a Vice President in 1994. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The information called for by this Item is set forth in Note 12 to the Consolidated Financial Statements of the Company which is incorporated by reference into Item 8 of this Report. ITEM 6. SELECTED FINANCIAL DATA The information called for by this Item is incorporated herein by reference from page 15 of the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1995. Such information should be read in conjunction with the Consolidated Financial Statements and Notes thereto of the Company included in Item 8 of this Report, incorporated by reference from the Company's Annual Report to Stockholders. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information called for by this Item is incorporated herein by reference from pages 16 through 19 of the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1995. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information called for by this Item is incorporated herein by reference from pages 20 through 28 of the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1995. Supplementary quarterly financial data, which is also incorporated herein by reference, is set forth in Note 12 to the Consolidated Financial Statements on page 27 of the Annual Report to Stockholders. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 6 7 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Directors -- See the Company's Proxy Statement dated March 13, 1996 for the Annual Meeting of Stockholders to be held on April 19, 1996, under the caption "Election of Directors" on pages 3 through 7, which information is incorporated herein by reference. Executive Officers of the Registrant -- See "Executive Officers of the Registrant" under Item 4A at pages 5 and 6 of this Report. Compliance with Section 16(a) of the Securities Exchange Act -- See the Company's Proxy Statement, dated March 13, 1996, for the Annual Meeting of Stockholders to be held on April 19, 1996 at page 7, under the caption "About the Board of Directors," which information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION See the Company's Proxy Statement dated March 13, 1996 for the Annual Meeting of Stockholders to be held on April 19, 1996, under the captions "Executive Compensation" and "Selected Benefit Plans" at pages 8 through 10 and 10 through 11, which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT See the Company's Proxy Statement dated March 13, 1996 for the Annual Meeting of Stockholders to be held on April 19, 1996, under the caption "Security Ownership" at pages 2 through 3, which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See the Company's Proxy Statement dated March 13, 1996 for the Annual Meeting of Stockholders to be held on April 19, 1996, under the captions "About The Board of Directors" at page 7, and "Stock Option Loans and Executive Officer Indebtedness" at page 11, which information is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES, AND REPORTS ON FORM 8-K The following Consolidated Financial Statements and related Notes, together with the Report thereon of Price Waterhouse LLP dated February 2, 1996, appearing on pages 20 through 28 of the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1995 are incorporated herein by reference: (A)1. CONSOLIDATED FINANCIAL STATEMENTS Consolidated Earnings and Retained Earnings for the years ended December 31, 1995, 1994, and 1993. Consolidated Balance Sheet at December 31, 1995 and 1994. Consolidated Statement of Cash Flows for the years ended December 31, 1995, 1994, and 1993. Notes to Consolidated Financial Statements. (A)2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULE The Financial Schedule and related Report of Independent Accountants filed as part of this Report are as follows:
PAGE ---- Schedule II -- Valuation Reserve.................................................. 10 Report of Independent Accountants................................................. 11
7 8 This Consolidated Financial Statement Schedule should be read in conjunction with the Consolidated Financial Statements included in the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1995. All other financial statement schedules are omitted because they are not applicable. (A)3. EXHIBITS
EXHIBIT NO. DESCRIPTION - ----------- ----------- 3.01 Amended Restated Certificate of Incorporation of Kellogg Company. 3.02 Bylaws of Kellogg Company, as amended. 4.01 Indenture dated as of March 1, 1988 between the Company and Bankers Trust Company, incorporated by reference to Exhibit 4(a) to the Company's Registration Statement on Form S-3, Commission file number 33-20731. 4.02 Form of Debt Security, incorporated by reference to Exhibit 4(d) to the Company's Registration Statement on Form S-3, Commission file number 33-20731. 4.03 Supplemental Indenture, dated January 30, 1989, between the Company and Bankers Trust Company, incorporated by reference to Exhibit B to the Company's Current Report on Form 8-K, Commission file number 1-4171, dated January 31, 1989. 4.04 Instrument of Resignation, Acceptance and Appointment, dated as of January 31, 1989, between the Company, Bankers Trust Company and NBD Bank, N.A. (formerly known as National Bank of Detroit), incorporated by reference to Exhibit A to the Company's Current Report on Form 8-K, Commission file number 1-4171, dated January 31, 1989. 4.05 Agency Agreement, dated as of January 31, 1989, between NBD Bank, N.A. (formerly known as National Bank of Detroit) and Bankers Trust Company, incorporated by reference to Exhibit C to the Company's Current Report on Form 8-K, Commission file number 1-4171, dated January 31, 1989. 10.01 Kellogg Company Excess Benefit Retirement Plan, incorporated by reference to Exhibit 10.01 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1983, Commission file number 1-4171.* 10.02 Kellogg Company Supplemental Retirement Plan, incorporated by reference to Exhibit 10.05 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission file number 1-4171.* 10.03 Kellogg Company Supplemental Savings and Investment Plan, incorporated by reference to Exhibit 10.03 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission file number 1-4171.* 10.04 Kellogg Company 1982 Stock Option Plan, as amended on December 7, 1990, incorporated by reference to Exhibit 10.07 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission file number 1-4171.* 10.05 Kellogg Company International Retirement Plan, incorporated by reference to Exhibit 10.05 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1984, Commission file number 1-4171.* 10.06 Kellogg Company Executive Survivor Income Plan, incorporated by reference to Exhibit 10.06 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1985, Commission file number 1-4171.* 10.07 Kellogg Company Key Executive Benefits Plan, incorporated by reference to Exhibit 10.09 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission file number 1-4171.*
8 9
EXHIBIT NO. DESCRIPTION - ----------- -------------------------------------------------------------------------------- 10.08 Kellogg Company Key Employee Long Term Incentive Plan, incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission file number 1-4171.* 10.09 Deferred Compensation Plan for Non-Employee Directors, incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission file number 1-4171.* 10.10 Kellogg Company Senior Executive Officer Performance Bonus Plan.* 13.01 Pages 15 through 28 of the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1995. 21.01 Domestic and Foreign Subsidiaries of the Company, incorporated by reference to Exhibit 21.01 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission file number 1-4171. 23.01 Consent of Price Waterhouse LLP. 23.02 Consent of Price Waterhouse LLP. 24.01 Powers of Attorney authorizing Richard M. Clark to execute the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 on behalf of the Board of Directors, and each of them. 27.01 Financial Data Schedule. 99.01 Kellogg Company American Federation of Grain Millers Savings and Investment Plan Annual Report on Form 11-K for the fiscal year ended October 31, 1995. 99.02 Kellogg Company Salaried Savings and Investment Plan Annual Report on Form 11-K for the fiscal year ended October 31, 1995.
- ------------------------- * A management contract or compensatory plan required to be filed with this Report. The Company agrees to furnish to the Securities and Exchange Commission, upon its request, a copy of any instrument defining the rights of holders of long-term debt of the Company and its Subsidiaries and any of its unconsolidated Subsidiaries for which Financial Statements are required to be filed. The Company will furnish any of its Stockholders a copy of any of the above Exhibits not included herein upon the written request of such Stockholder and the payment to the Company of the reasonable expenses incurred by the Company in furnishing such copy or copies. (B) REPORT ON FORM 8-K No report on Form 8-K was filed during the Company's fourth quarter for the fiscal year ended December 31, 1995. 9 10 SCHEDULE II -- VALUATION RESERVE (in millions)
1995 1994 1993 ----- ----- ----- Balance at January 1................................................... $ 6.2 $ 6.0 $ 6.2 Addition charged to costs and expenses................................. 0.8 1.8 0.9 Doubtful accounts charged to reserves.................................. (0.5) (0.9) (0.7) Currency translation adjustments....................................... (0.1) (0.7) (0.4) Balance at December 31................................................. $ 6.4 $ 6.2 $ 6.0
10 11 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Stockholders and Board of Directors of Kellogg Company Our audits of the consolidated financial statements referred to in our report dated February 2, 1996 appearing in the 1995 Annual Report to Stockholders of Kellogg Company (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PRICE WATERHOUSE LLP Battle Creek, Michigan February 2, 1996 11 12 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, this 29th day of March 1996. KELLOGG COMPANY By: /s/ ARNOLD G. LANGBO -------------------------------------- Arnold G. Langbo Chairman of the Board Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
NAME CAPACITY DATE - ---------------------------------------- ----------------------------------- --------------- /s/ ARNOLD G. LANGBO Chairman of the Board, Chief March 29, 1996 - ---------------------------------------- Executive Officer; Director Arnold G. Langbo (Principal Executive Officer) /s/ JOHN R. HINTON Senior Vice President, Chief March 29, 1996 - ---------------------------------------- Financial Officer (Principal John R. Hinton Financial Officer) /s/ ALAN TAYLOR Vice President and Corporate March 29, 1996 - ---------------------------------------- Controller (Principal Accounting Alan Taylor Officer) Director - ---------------------------------------- Claudio X. Gonzalez Director - ---------------------------------------- Gordon Gund Director - ---------------------------------------- William E. LaMothe Director - ---------------------------------------- Russell G. Mawby Director - ---------------------------------------- Ann McLaughlin Director - ---------------------------------------- J. Richard Munro Director - ---------------------------------------- Harold A. Poling Director - ---------------------------------------- Donald Rumsfeld Director - ---------------------------------------- Timothy P. Smucker Director - ---------------------------------------- Dolores D. Wharton Director - ---------------------------------------- John L. Zabriskie By: /s/ RICHARD M. CLARK March 29, 1996 - ---------------------------------------- Richard M. Clark As Attorney-in-Fact
12 13 EXHIBIT INDEX
ELECTRONIC(E) PAPER(P) INCORP. BY EXHIBIT NO. DESCRIPTION REF.(IBRF) - ----------- --------------------------------------------------------------------- ------------- 3.01 Amended Restated Certificate of Incorporation of Kellogg Company. E 3.02 Bylaws of Kellogg Company, as amended. E 4.01 Indenture dated as of March 1, 1988 between the Company and Bankers Trust Company, incorporated by reference to Exhibit 4(a) to the Company's Registration Statement on Form S-3, Commission file number 33-20731. IBRF 4.02 Form of Debt Security, incorporated by reference to Exhibit 4(d) to the Company's Registration Statement on Form S-3, Commission file number 33-20731. IBRF 4.03 Supplemental Indenture, dated January 30, 1989, between the Company and Bankers Trust Company, incorporated by reference to Exhibit B to the Company's Current Report on Form 8-K, Commission file number 1-4171, dated January 31, 1989. IBRF 4.04 Instrument of Resignation, Acceptance and Appointment, dated as of January 31, 1989, between the Company, Bankers Trust Company and NBD Bank, N.A. (formerly known as National Bank of Detroit), incorporated by reference to Exhibit A to the Company's Current Report on Form 8-K, Commission file number 1-4171, dated January 31, 1989. IBRF 4.05 Agency Agreement, dated as of January 31, 1989, between NBD Bank, N.A. (formerly known as National Bank of Detroit) and Bankers Trust Company, incorporated by reference to Exhibit C to the Company's Current Report on Form 8-K, Commission file number 1-4171, dated January 31, 1989. IBRF 10.01 Kellogg Company Excess Benefit Retirement Plan, incorporated by reference to Exhibit 10.01 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1983, Commission file number 1-4171.* IBRF 10.02 Kellogg Company Supplemental Retirement Plan, incorporated by reference to Exhibit 10.05 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission file number 1-4171.* IBRF 10.03 Kellogg Company Supplemental Savings and Investment Plan, incorporated by reference to Exhibit 10.03 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission file number 1-4171.* IBRF 10.04 Kellogg Company 1982 Stock Option Plan, as amended on December 7, 1990, incorporated by reference to Exhibit 10.07 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission file number 1-4171.* IBRF 10.05 Kellogg Company International Retirement Plan, incorporated by reference to Exhibit 10.05 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1984, Commission file number 1-4171.* IBRF 10.06 Kellogg Company Executive Survivor Income Plan, incorporated by reference to Exhibit 10.06 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1985, Commission file number 1-4171.* IBRF 10.07 Kellogg Company Key Executive Benefits Plan, incorporated by reference to Exhibit 10.09 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission file number 1-4171.* IBRF
13 14
ELECTRONIC(E) PAPER(P) INCORP. BY EXHIBIT NO. DESCRIPTION REF.(IBRF) - ----------- --------------------------------------------------------------------- ------------- 10.08 Kellogg Company Key Employee Long Term Incentive Plan, incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission file number 1-4171.* IBRF 10.09 Deferred Compensation Plan for Non-Employee Directors, incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission file number 1-4171.* IBRF 10.10 Kellogg Company Senior Executive Officer Performance Bonus Plan.* E 13.01 Pages 15 through 28 of the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1995. E 21.01 Domestic and Foreign Subsidiaries of the Company, incorporated by reference to Exhibit 21.01 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission file number 1-4171. IBRF 23.01 Consent of Price Waterhouse LLP. E 23.02 Consent of Price Waterhouse LLP. E 24.01 Powers of Attorney authorizing Richard M. Clark to execute the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 on behalf of the Board of Directors, and each of them. E 27.01 Financial Data Schedule. E 99.01 Kellogg Company American Federation of Grain Millers Savings and Investment Plan Annual Report on Form 11-K for the fiscal year ended October 31, 1995. E 99.02 Kellogg Company Salaried Savings and Investment Plan Annual Report on Form 11-K for the fiscal year ended October 31, 1995. E
- ------------------------- * A management contract or compensatory plan required to be filed with this Report. The Company will furnish any of its stockholders a copy of any of the above Exhibits not included herein upon the written request of such stockholder and the payment to the Company of the reasonable expenses incurred by the Company in furnishing such copy or copies. 14 EX-3.01 2 EXHIBIT 3.01 1 EXHIBIT 3.01 KELLOGG COMPANY AMENDED RESTATED CERTIFICATE OF INCORPORATION (With All Amendments Through April 21, 1995) FIRST The name of this corporation is KELLOGG COMPANY. SECOND Its registered office, in the State of Delaware, is located at No. 100 West Tenth Street, in the City of Wilmington, County of New Castle. The name and address of its registered agent is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware. THIRD The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be now or hereafter organized under the General Corporation Law of Delaware. FOURTH The total number of shares of capital stock which this Corporation shall have authority to issue is 330,000,000 shares of common stock of the par value of $0.25 per share. Each share of common stock, $0.25 par value per share, of this Corporation, issued and held of record at the close of business on December 4, 1991, including shares held by this Corporation as treasury shares, shall automatically be converted at such time into two validly issued, fully paid and nonassessable shares of common stock, $0.25 par value per share. A statement of the designations, dividend rights, voting powers, preferences and rights, and the qualifications, limitations or 2 restrictions thereof, of the shares of stock which the corporation shall be authorized to issue, is as follows: COMMON STOCK 1. Dividends. Dividends may be paid upon the common stock as and when declared by the Board of Directors out of funds legally available for the payment of dividends. 2. Voting Powers. The holders of the common stock shall have the exclusive right to vote for the election of Directors and for all other purposes, each holder of common stock being entitled to one vote for each share thereof held. 3. Preemptive Rights. No holder of stock of the Corporation shall have any preemptive right to subscribe for, purchase, or otherwise acquire shares of stock of the Corporation of any class, whether now or hereafter authorized, nor shall any holder of stock of the Corporation have any preemptive right to subscribe for, purchase, or otherwise acquire bonds, notes or other securities, whether or not convertible, into shares of stock of the Corporation of any class; and the Board of Directors may, from time-to-time, and at any time, cause shares of stock of the Corporation of any class to be issued, sold or otherwise disposed of at such price or prices and upon such terms as the Board of Directors may determine. 4. Liquidation Rights. Upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, the net assets of the Corporation shall be distributed ratably to the holders of the common stock. 5. Liability to Further Call or Assessment. The stock heretofore issued shall be fully paid and nonassessable. 6. Fractional Shares. No fractional shares of any class of stock shall be issued. 3 FIFTH The number of shares with which this Corporation will commence business is ten (10) shares of common stock, which shares are without nominal or par value. SIXTH This Corporation is to have perpetual existence. SEVENTH The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatever. EIGHTH The Corporation may, in its Bylaws, confer powers upon its Directors in addition to the powers and authorities expressly conferred upon them by statute. NINTH This Restated Certificate of Incorporation, as amended, shall be subject to alteration, amendment or repeal, and new provisions thereof may be adopted by the affirmative vote of the holders of not less than a majority of the outstanding shares of capital stock entitled to vote generally in the election of Directors (such outstanding shares hereinafter referred to collectively as the "Voting Stock"), voting together as a single class, at any regular or special meeting of the stockholders (but only if notice of the proposed change be contained in the notice to the stockholders of the proposed meeting). Notwithstanding the foregoing and in addition to any other requirements of applicable law, the alteration, amendment or repeal of, or the adoption of any provision inconsistent with, this Article NINTH or Article TENTH, ELEVENTH or TWELFTH of this Restated Certificate of Incorporation, as amended, shall require the affirmative vote of the holders of not less than two-thirds of the voting power of all shares of the Voting Stock, voting together as a single class, at any regular or special meeting of the stockholders. 3 4 The Bylaws of this Corporation shall be subject to alteration, amendment or repeal, and new bylaws may be adopted (i) by the affirmative vote of the holders of not less than a majority of the voting power of all shares of the Voting Stock, voting together as a single class, at any regular or special meeting of the stockholders (but only if notice of the proposed change be contained in the notice to the stockholders of the proposed meeting), or (ii) by the affirmative vote of not less than a majority of the members of the Board of Directors at any meeting of the Board of Directors at which there is a quorum present and voting; provided, that any alteration, amendment or repeal, or the adoption of any provision inconsistent with Article II, Section 2 or Section 6, or Article III, Section 1, Section 2 or Section 5, or Article XIV, Section 1 of the Bylaws, shall require, in the case of clause (i), the affirmative vote of the holders of not less than two-thirds of the voting power of all shares of the Voting Stock, voting together as a single class, at any regular or special meeting of the stockholders, or, in the case of clause (ii), the affirmative vote of such number of Directors constituting not less than two-thirds of the total number of directorships fixed by a resolution adopted by the Board of Directors pursuant to Article TENTH of this Restated Certificate of Incorporation, as amended, whether or not such directorships are filled at the time (such total number of directorships hereinafter referred to as the "Full Board"). TENTH The number of Directors of this Corporation shall be not less than twelve (12) nor more than eighteen (18). The exact number of Directors within such limitations shall be fixed from time-to-time by a resolution adopted by not less than two-thirds of the Full Board (as defined in Article NINTH). At the 1986 Annual Meeting of Stockholders, the Directors shall be divided into three classes, as nearly equal in number as possible, with the term of office of the first class to expire at the 1987 Annual Meeting of Stockholders, the term of office of the second class to expire at the 1988 Annual Meeting of Stockholders, and the term of office of the third class to expire at the 1989 Annual Meeting of Stockholders. At each Annual Meeting of Stockholders following such initial classification and election, the class of Directors whose terms of office shall expire at such time shall be elected to hold office for terms expiring at the third succeeding Annual Meeting of Stockholders following their election. Each Director shall hold office until his successor shall be elected and shall qualify. Subject to the rights of the holders of any particular class or series of equity securities of this Corporation, (i) newly created directorships resulting from any increase in the total number of authorized Directors may be filled by the affirmative vote of not less than two-thirds of the Directors then in office, although less than a quorum, or by a sole remaining Director, at any 4 5 regular or special meeting of the Board of Directors, or by the stockholders, in accordance with the Bylaws, and (ii) any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by the affirmative vote of not less than two-thirds of the Directors then in office, although less than a quorum, or by a sole remaining Director, at any regular or special meeting of the Board of Directors. Any Director so chosen shall hold office for a term expiring at the Annual Meeting of Stockholders at which the term of office of the class of Directors to which he or she has been elected expires. No decrease in the total number of authorized Directors constituting the Board of Directors shall shorten the term of office of any incumbent Director. Subject to the rights of the holders of any particular class or series of equity securities of this Corporation, any Director may be removed only for cause and only by the affirmative vote of the holders of not less than two-thirds of the voting power of all shares of Voting Stock, voting together as a single class, at any regular or special meeting of the stockholders, subject to any requirement for a larger vote contained in any applicable law, this Corporation's Restated Certificate of Incorporation, as amended, or the Bylaws. ELEVENTH Any action required or permitted to be taken by the stockholders of this Corporation may be effected solely at an Annual or Special Meeting of Stockholders duly called and held in accordance with law and this Corporation's Restated Certificate of Incorporation, as amended, and may not be effected by any consent in writing by such stockholders or any of them. TWELFTH Except as otherwise expressly provided in the immediately following paragraph: (a) any merger or consolidation of this Corporation with or into any other corporation other than a Subsidiary (as hereinafter defined); or (b) any sale, lease, exchange or other disposition by this Corporation or any Subsidiary of assets constituting all or substantially all of the assets of this Corporation and its Subsidiaries taken as a whole, to or with, any other 5 6 person or entity in a single transaction or series of related transactions; or (c) any liquidation or dissolution of this Corporation; shall require, in addition to any vote required by law or otherwise, the affirmative approval of holders of not less than two-thirds of the voting power of the Voting Stock. The provisions of this Article TWELFTH shall not apply to any transaction described in the immediately preceding paragraph if such transaction is approved by a majority of the Continuing Directors (as hereinafter defined). For purposes of this Article TWELFTH, (a) the term "Subsidiary" means any corporation of which a majority of each class of equity security is beneficially owned, directly or indirectly, by this Corporation; (b) the term "Affiliate'', as used to indicate a relationship to a specified person, shall mean a person who, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person, except that, notwithstanding the foregoing, a Director of this Corporation shall not be deemed to be an Affiliate of a specified person if such Director, in the absence of being a stockholder, Director or officer of this Corporation, or a Director or officer of any Subsidiary, would not be an Affiliate of such specified person; (c) the term "Associate", as used to indicate a relationship with a specified person, shall mean (i) any corporation, partnership or other organization of which such specified person is an officer or partner, or beneficially owns, directly or indirectly, ten percent or more of any class of equity securities; (ii) any trust or other estate in which such specified person has a substantial beneficial interest, or as to which such specified person serves as trustee or in a similar fiduciary duty; (iii) any relative or spouse of such specified person, or any relative of such spouse who has the same home as such specified person; and (iv) any person who is a Director or officer of such specified person or any of its Affiliates, except that notwithstanding clauses (i), (ii), (iii) and (iv) above, a Director of this Corporation shall not be deemed to be an Associate of a specified person if such Director, in the absence of being a stockholder, Director or officer of this Corporation, or a Director or officer of any Subsidiary, would not be an Associate of such specified person; (d) the term "Transacting Entity" shall mean (i) a corporation with which this Corporation merges or consolidates in a transaction described in clause (a) of the first paragraph of this Article TWELFTH; (ii) a person or entity to which this Corporation sells, leases, exchanges or otherwise disposes of assets in a transaction described in clause (b) of the first paragraph of this Article TWELFTH; or (iii) a person, other than the Chief Executive Officer of this Corporation, or entity, who shall propose a liquidation or dissolution described in clause (c) of the first paragraph of this Article TWELFTH; and (e) the term "Continuing Director" 6 7 shall mean a Director who is neither an Affiliate nor an Associate of the Transacting Entity, provided that if there be no Transacting Entity, each Director is a Continuing Director. THIRTEENTH SECTION 1. No person who is or was at any time a Director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director; provided, however, that unless and except to the extent otherwise permitted from time-to-time by applicable law, the provisions of this Article shall not eliminate or limit the liability of a Director (i) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of Delaware, (iv) for any transaction from which the Director derived an improper personal benefit, or (v) for any act or omission occurring prior to the date this Article becomes effective. Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a Director of the Corporation existing at the time of such repeal or modification. SECTION 2. (a). Right to Indemnification. Each person who was or is made a party, or is threatened to be made a party to, or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "Proceeding"), by reason of the fact that he or she is or was a Director or officer of the Corporation, where the basis of such Proceeding is an alleged action or omission in an official capacity as such, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to amendment) against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes, or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith, and such indemnification shall continue as to an indemnitee who has ceased 7 8 to be a Director or officer, and shall inure to the benefit of the indemnitee's heirs, executors and administrators; provided, however, that except as provided in paragraph (b) hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a Proceeding (or part thereof) initiated by such indemnitee only if such Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such Proceeding in advance of its final disposition (hereinafter an "Advancement of Expenses"); provided, however, that if the Delaware General Corporation Law requires, an Advancement of Expenses incurred by an indemnitee in his or her capacity as a Director or officer shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision, from which there is no further right to appeal, that such indemnitee is not entitled to be indemnified for such expenses under this section or otherwise (hereinafter an "Undertaking"). (b). Right of Indemnitee to Bring Suit. If a claim under paragraph (a) of this section is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an Advancement of Expenses, in which case the applicable period shall be twenty days, the indemnitee may, at any time thereafter, bring suit against the Corporation to recover the unpaid amount of the claim. If successful, in whole or in part, in any suit, or in a suit brought by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i), any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an Advancement of Expenses), it shall be a defense that, and (ii) any suit by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct, or, in the case of such a suit brought by the indemnitee, be a 8 9 defense to such suit. In any suit brought by the indemnitee to enforce a right hereunder, or by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the burden of proving that the indemnitee is not entitled to be indemnified or to such Advancement of Expenses under this section or otherwise, shall be on the Corporation. (c). Non-Exclusivity of Rights. The rights to indemnification and to the Advancement of Expenses conferred in this section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, this Certificate of Incorporation, bylaw agreement, vote of stockholders or disinterested Directors, or otherwise. (d). Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any Director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. (e). Other Indemnification. The Corporation may, to the extent authorized from time-to-time by the Board of Directors, grant rights to indemnification and to the Advancement of Expenses to any Director, officer, employee or agent of the Corporation, whether or not acting in his or her capacity as such, or at the request of the Corporation, to the fullest extent of the provisions of this section with respect to the indemnification and Advancement of Expenses of Directors and officers of the Corporation. 9 10 CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION Kellogg Company, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST: That the Board of Directors of the corporation at a meeting duly held October 21, 1994 adopted a resolution proposing and declaring the amendment set forth below to the Corporation's Amended and Restated Certificate of Incorporation to be advisable and calling for submission thereof to the stockholders of the corporation at its next Annual Meeting. The resolution setting forth the proposed amendment is as follows: RESOLVED, That the Amended and Restated Certificate of Incorporation of this Corporation be amended by changing the first paragraph of Article TENTH thereof so that, as amended, said Article shall be and read as follows: TENTH The number of Directors of this Corporation shall be not less than seven (7) nor more than fifteen (15). The exact number of Directors within such limitations shall be fixed from time-to-time by a resolution adopted by not less than two-thirds of the Full Board (as defined in Article NINTH). The Directors shall be divided into three classes, as nearly equal in number as possible, with a term of office of three years, one class to expire each year. At each Annual Meeting of Stockholders, the class of Directors whose terms of office shall expire at such time shall be elected to hold office for terms expiring at the third succeeding Annual Meeting of Stockholders following their election. Each Director shall hold office until his successor shall be elected and shall qualify. SECOND: That thereafter, at the Annual Meeting held April 21, 1995, the necessary number of shares as required by the Certificate of Incorporation and applicable bylaw were voted in favor of the amendment. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 222 and 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said Kellogg Company has caused this certificate to be signed by Richard M. Clark, its Senior Vice President, General Counsel and Secretary, this 8th day of May, 1995. Kellogg Company By s/ Richard M. Clark ----------------------------------- Richard M. Clark Senior Vice President, Attest: General Counsel and Secretary s/ Edward J. Gildea - ------------------------------- Edward J. Gildea Assistant Secretary 10 EX-3.02 3 EXHIBIT 3.02 1 EXHIBIT 3.02 KELLOGG COMPANY BYLAWS (As Amended Up To And Including April 21, 1995) ARTICLE I OFFICES SECTION 1. OFFICES. The principal office shall be in the City of Wilmington, County of New Castle, State of Delaware, and the name of the resident agent in charge thereof is The Corporation Trust Company. The Corporation may also have an office in the City of Battle Creek, State of Michigan, and also offices at such other places as the Board of Directors may, from time-to-time, appoint, or the business of this Corporation may require. ARTICLE II STOCKHOLDERS SECTION 1. ANNUAL MEETINGS. The Annual Meeting of Stockholders of this Corporation may be held either within or without the State of Delaware at a time and place to be designated by the Board of Directors. Notice of such Annual Meeting shall be given by the Secretary, by mailing a written or printed notice stating the place, day and hour of the meeting to each stockholder of record entitled to vote at such meeting, at least ten (10) days prior to the date of such meeting, at such stockholder's last known post office address as the same appears upon the books of this Corporation. The Chairman of the Board, or in such officer's absence or incapacity, a Vice Chairman, or in such officer's absence or incapacity, the President and Secretary of this Corporation, shall act as president and secretary, respectively, of each stockholders' meeting unless it shall be otherwise determined at the meeting. SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders may be held either within or without the State of Delaware and may be called (i) by such number of Directors constituting not less than two-thirds of the total number of directorships fixed by a resolution adopted by the Board of Directors pursuant to Article III, Section 1 of these Bylaws, whether or not such directorships are filled at the time (such total number of directorships hereinafter referred to as the "Full Board"), or by the Chairman of the Board, or in such officer's absence or incapacity, by a Vice Chairman, or in such officer's 2 absence or incapacity, by the President, by mailing a written or printed notice at least ten (10) days prior to the date of such meeting to each stockholder of record entitled to vote at such meeting (at such stockholder's last known post office address as the same appears on the books of this Corporation), or (ii) by any stockholder or stockholders holding not less than one-third of the voting power of all of the outstanding shares of capital stock of this Corporation entitled to vote at such meeting, voting together as a single class, by mailing a written or printed notice at least thirty (30) days prior to the date of such meeting to each stockholder of record entitled to vote at such meeting. The notice required by clause (i) or (ii) of the immediately preceding sentence shall state the place, date and hour of such meeting and any and all purposes for which the meeting is called. SECTION 3. VOTES. Each stockholder shall be entitled to one (1) vote for each share of capital stock held on all matters to be voted upon. Each stockholder entitled to vote shall be entitled to vote in person or by proxy, but no proxy shall be voted on after three (3) years from its date unless said proxy provides for a longer period. Except where the transfer books of this Corporation shall have been closed, or a date shall have been fixed as a record date for the determination of stockholders entitled to vote, no share of stock shall be voted on at any election for Directors which shall have been transferred on the books of this Corporation within twenty (20) days next preceding such election of Directors. SECTION 4. QUORUM. At any meeting at which the holders of capital stock shall be entitled to vote for the election of Directors or for other purposes, the holders of a majority of the outstanding shares of capital stock entitled to vote at such meeting, and present in person or by proxy, shall constitute a quorum for the purpose of electing Directors or for such other purposes. In the absence of a quorum of holders of capital stock at any meeting of stockholders at which they are entitled to vote, the holders of capital stock present at such meeting may adjourn the meeting to a future day for such vote as the holders of capital stock are entitled and wish to take without any notice other than an announcement at the meeting. At any such adjourned meeting at which a quorum shall be present, any business may be transacted by stockholders which they might have transacted at the meeting as originally notified. SECTION 5. STOCKHOLDERS LISTS. A complete list of the stockholders entitled to vote at the ensuing election, arranged in alphabetical order, with the residence of each and the number of voting shares held by each, shall be prepared by the Secretary and filed in the office where the election is to be held at least ten (10) days before every election, and shall, at all times, during the usual hours for business, and during the whole time of said election, and at the place thereof, be open to the examination of any stockholder entitled to vote thereat. SECTION 6. CONSENTS TO CORPORATE ACTION. The record date for determining stockholders entitled to express consent to corporate action in writing 3 without a meeting shall be fixed by the Board of Directors. Any stockholder seeking to have the stockholders authorize or take corporate action by written consent without a meeting shall, by written notice, request the Board of Directors to fix a record date. The Board of Directors shall, upon receipt of such a request, fix a record date, which shall be not later than the 15th day following receipt of the request, or such later date as may be specified by such stockholder. If the record date falls on a Saturday, Sunday or legal holiday, the record date shall be the day next following which is not a Saturday, Sunday or legal holiday. Subject to the immediately following paragraph, the date for determining if an action has been consented to by the holder or holders of shares of outstanding stock of this Corporation having the requisite voting power to authorize or take the action specified therein (the "Consent Date") shall be the 31st day after the date on which materials soliciting consents are mailed to stockholders of this Corporation or, if no such materials are required to be mailed under applicable law, the 31st day following the record date fixed by the Board pursuant to the immediately preceding paragraph. If the Consent Date falls on a Saturday, Sunday or legal holiday, the Consent Date shall be the day next following which is not a Saturday, Sunday or legal holiday. In the event of the delivery to this Corporation of a written consent or consents purporting to authorize or take corporate action and/or related revocations (each such written consent and related revocation hereinafter referred to in this Section 6 as a "Consent"), the Secretary of this Corporation shall provide for the safekeeping of such Consent and shall conduct such reasonable investigation as the Secretary deems necessary or appropriate for the purpose of ascertaining the validity of such Consent and all matters incident thereto, including, without limitation, whether the holders of shares having the requisite voting power to authorize or take the action specified in the Consent have given consent; provided, that if the corporate action to which the Consent relates is the removal or replacement of one or more members of the Board of Directors, the Secretary of this Corporation shall designate two persons, who shall not be members of the Board, to serve as inspectors with respect to such Consent, and such inspectors shall discharge the functions of the Secretary of this Corporation under this paragraph. If, after such investigation, the Secretary, or such inspectors, as the case may be, shall determine that the Consent is valid, that fact shall be certified on the records of this Corporation kept for the purpose of recording the proceedings of meetings of the stockholders, and the Consent shall be filed with such records, at which time the Consent shall become effective as stockholder action; provided, that neither the Secretary, nor such inspectors, as the case may be, shall make such certification or filing, and the Consent shall not become effective as stockholder action, until the final termination, without the availability of any further appeal, of any proceedings which may have been commenced in the Court of Chancery of the State of Delaware, or any other court of competent jurisdiction, for an adjudication of any legal issues incident to determining the validity of the Consent, unless and until such Court has determined that such proceedings are not being pursued expeditiously and in good faith. In conducting the investigation required by this paragraph, the Secretary, or such inspectors, as the case may be, may, at the expense of this 3 4 Corporation, retain special legal counsel and any other necessary or appropriate professional advisors and such other personnel, as they may deem necessary or appropriate, to assist them. To the extent that this Section 6 is inconsistent with this Corporation's Restated Certificate of Incorporation, as amended, the provisions of this Corporation's Restated Certificate of Incorporation, as amended, will prevail. ARTICLE III DIRECTORS SECTION 1. MEMBERSHIP. The number of Directors of this Corporation shall be not less than seven (7) nor more than fifteen (15), the exact number of Directors to be fixed from time-to-time by a Resolution adopted by not less than two-thirds of the full Board (as defined in Article NINTH of the Restated Certificate of Incorporation). Directors shall be divided into three classes, as nearly equal in number as possible, with a term of office of three years, one class to expire each year. At each Annual Meeting of Stockholders, the class of Directors whose terms of office shall expire at such time shall be elected by a plurality vote by ballot to hold office for terms expiring at the third Annual Meeting of Stockholders following their election and until a successor shall be elected and shall qualify. Nominations for the election of Directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of Directors at the particular meeting at which the nomination is to occur. However, any stockholder entitled to vote at such meeting may nominate one or more persons for election as Directors only in person or by proxy at such meeting and only if written notice of such stockholder's intent to make such nomination or nominations has been delivered personally to, or otherwise received by, the Secretary of this Corporation at least thirty (30) days, but no more than ninety (90) days prior to the anniversary date of the record date for determination of stockholders entitled to vote in the immediately preceding Annual Meeting of Stockholders. Each such notice shall contain a representation that: (i) the stockholder is, and will be, on the record date, a beneficial owner or a holder of record of stock of this Corporation entitled to vote at such meeting; (ii) the stockholder has, and will have, on the record date, full voting power with respect to such shares; and (iii) the stockholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice. Additionally, each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a description of all arrangements or understandings between the stockholder and each proposed nominee, and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (c) the number and kinds 4 5 of securities of this Corporation held beneficially or of record by each proposed nominee; (d) such other information regarding each proposed nominee as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission for the initial election of such proposed nominee for Director; and (e) the consent of each proposed nominee to serve as a Director if so elected. The presiding officer of the meeting may refuse to acknowledge the nomination of any person if any of the information supplied is false or misleading or if any of the foregoing requirements are not satisfied. SECTION 2. VACANCIES. Subject to the rights of the holders of any particular class or series of equity securities of this Corporation, (i) newly created directorships resulting from any increase in the total number of authorized Directors may be filled by the affirmative vote of not less than two-thirds of the Directors then in office, although less than a quorum, or by a sole remaining Director, at any regular or special meeting of the Board of Directors, or by a plurality vote of the stockholders at any regular Annual Meeting or Special Meeting of Stockholders, and (ii) any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by the affirmative vote of not less than two-thirds of the Directors then in office, although less than a quorum, or by a sole remaining Director, at any regular or special meeting of the Board of Directors. SECTION 3. PLACE OF MEETINGS. The Directors may hold their meetings and have one or more offices and keep the books of this Corporation outside of Delaware at the office of this Corporation, in the City of Battle Creek, Michigan, or at such other place or places as they may, from time-to-time, determine. SECTION 4. REGULAR MEETINGS. In months other than the month in which the Annual Meeting of Stockholders shall be held, regular meetings of the Board of Directors shall be held without other notice than this bylaw, on the fourth Friday of each month, if not a legal holiday, and if a legal holiday, then on the preceding business day, at such time and place as the Board of Directors may designate, or, if no such designation shall have been made, at the executive offices of this Corporation, in the City of Battle Creek, Michigan, at the hour of 1:30 p.m., local time. A regular meeting of the Board of Directors shall also be held without other notice than this bylaw, immediately after, and at the same place as the Annual Meeting of Stockholders. The Board of Directors may provide, by resolution, the time and place for the holding of different or additional regular meetings or the cancellation of a regular meeting(s) without other notice than such resolution. SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors, to be held within or without the State of Delaware, may be called by the Chairman of the Board, or in such officer's absence or incapacity, by a Vice Chairman, or in such officer's absence or incapacity, by the President, or in such officer's absence or incapacity, by an Executive Vice President, or in such officer's absence or incapacity, by not less than six (6) Directors (provided, that if this Corporation's Restated Certificate of 5 6 Incorporation, as amended, provides for the division of the Board of Directors into three classes, no more than two of such members of the Board of Directors shall be from the same class), by giving one day's notice thereof in the case of special meetings called by the Chairman of the Board, a Vice Chairman, the President or an Executive Vice President, as the case may be, or ten day's notice thereof in the case of all other special meetings, which notice shall, in the case of any special meeting, set forth the time and place of the meeting and be made orally, or in writing, or by telegraph or by telephone, and shall, in the case of special meetings not called by the Chairman of the Board, a Vice Chairman, the President or an Executive Vice President, also set forth in reasonable detail any and all purposes for which the special meeting is called. SECTION 6. VOTES. Any member of the Board may require the ayes and noes to be taken on any questions and recorded on the Minutes. SECTION 7. QUORUM. Except as herein otherwise specifically provided, a majority of the number of Directors constituting the Full Board (as defined in Article II, Section 2) shall constitute a quorum for the transaction of business. SECTION 8. COMPENSATION OF DIRECTORS. Compensation of Directors shall be as determined by the Board. Nothing contained herein shall be construed to preclude any Director from serving this Corporation in any other capacity and receiving compensation therefor. SECTION 9. NOTICES. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the call or notice, or waiver of notice of such meeting, unless specifically required by law, this Corporation's Restated Certificate of Incorporation, as amended, or these Bylaws. ARTICLE IV COMMITTEES SECTION 1. EXECUTIVE COMMITTEE. There may be an Executive Committee of two or more Directors, including the Chairman of the Board, designated by resolution of the Board of Directors. Said Committee may meet at stated times or on notice to all by any of their own number. During the intervals between meetings of the Board, the members of such Committee, who shall be requested to do so, shall advise and aid the officers in all matters concerning its interests and the management of its business, and generally perform such duties and exercise such powers as may be directed or delegated by the Board of Directors from time-to-time. The Board may delegate to such Committee authority to exercise all powers of the Board, except those powers specifically excluded from committees by Section 141(c) of the Delaware General Corporation Law and except the power to authorize the issuance of stock of this Corporation while the Board is not in 6 7 session. Vacancies in the membership of the Committee shall be filled by the Board of Directors at a regular meeting or at a special meeting called for that purpose. The Executive Committee may, in its discretion, keep regular minutes of its proceedings and shall report the same to the Board when required. In the absence or disqualification of a member of the Executive Committee, the member or members of the Executive Committee present at a meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors of the Company to act at the meeting in place of each such absent or disqualified member. SECTION 2. AUDIT COMMITTEE. There may be an Audit Committee of two or more Directors designated by resolution of the Board of Directors. Said Committee may meet at stated times or on notice to all by any of its own number. The Committee and its membership shall generally perform such duties and exercise such powers as may be directed or delegated by the Board of Directors from time-to-time. Vacancies in the membership of the Committee shall be filled by the Board of Directors at a regular meeting or at a special meeting called for that purpose. The Committee may, in its discretion, keep regular minutes of its proceedings and shall report the same to the Board when required. SECTION 3. COMPENSATION COMMITTEE. There may be a Compensation Committee of two or more Directors designated by resolution of the Board of Directors. Said Committee may meet at stated times or on notice to all by any of its own number. The Committee and its membership shall generally perform such duties and exercise such power as may be directed or delegated by the Board of Directors from time-to-time. Vacancies in the membership of the Committee shall be filled by the Board of Directors at a regular meeting or at a special meeting called for that purpose. The Committee may, in its discretion, keep regular minutes of its proceedings and shall report the same to the Board when required. SECTION 4. EMPLOYEE BENEFITS ADVISORY COMMITTEE. There may be an Employee Benefits Advisory Committee of two or more Directors designated by resolution of the Board of Directors. Said Committee may meet at stated times or on notice to all by any of its own number. The Committee and its membership shall generally perform such duties and exercise such powers as may be directed or delegated by the Board of Directors from time-to-time. Vacancies in the membership of the Committee shall be filled by the Board of Directors at a regular meeting or at a special meeting called for that purpose. The Committee may, in its discretion, keep regular minutes of its proceedings and shall report the same to the Board when required. SECTION 5. FINANCE COMMITTEE. There may be a Finance Committee of two or more Directors designated by resolution of the Board of Directors. Said Committee may meet at stated times or on notice to all by any of its own number. The Committee and its membership shall generally perform such duties and exercise such 7 8 powers as may be directed or delegated by the Board of Directors from time-to-time. Vacancies in the membership of the Committee shall be filled by the Board of Directors at a regular meeting or at a special meeting called for that purpose. The Committee may, in its discretion, keep regular minutes of its proceedings and shall report the same to the Board when required. SECTION 6. NOMINATING COMMITTEE. There may be a Nominating Committee of two or more Directors designated by resolution of the Board of Directors. Said Committee may meet at stated times or on notice to all by any of its own number. The Committee and its membership shall generally perform such duties and exercise such powers as may be directed or delegated by the Board of Directors from time-to-time. Vacancies in the membership of the Committee shall be filled by the Board of Directors at a regular meeting or at a special meeting called for that purpose. The Committee may, in its discretion, keep regular minutes of its proceedings and shall report the same to the Board when required. SECTION 7. COMMITTEE ON SOCIAL RESPONSIBILITY. There may be a Committee on Social Responsibility of two or more Directors designated by resolution of the Board of Directors. Said Committee may meet at stated times or on notice to all by any of its own number. The Committee and its membership shall generally perform such duties and exercise such powers as may be directed or delegated by the Board of Directors from time-to-time. Vacancies in the membership of the Committee shall be filled by the Board of Directors at a regular meeting or at a special meeting called for that purpose. The Committee may, in its discretion, keep regular minutes of its proceedings and shall report the same to the Board when required. SECTION 8. OTHER COMMITTEES. The Board of Directors, by resolution, may dissolve existing committees and may designate additional committees, each of which shall consist of not less than two Directors. Each such additional committee may meet at stated times or on notice to all by any of its own number. Each such additional committee and its membership shall generally perform such duties and exercise such powers as may be directed or delegated by the Board of Directors from time-to-time. Vacancies in the membership of any such additional committee shall be filled by the Board of Directors at a regular meeting or at a special meeting called for that purpose. Any such additional committee may, in its discretion, keep regular minutes of its proceedings and shall report the same to the Board of Directors when required. ARTICLE V OFFICERS SECTION 1. OFFICERS. The officers of this Corporation shall be elected by the Board of Directors and shall consist of the Chairman of the Board (if designated as 8 9 the Chief Executive Officer by the Board), the President, one or more Vice Presidents, a Secretary, a Controller, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and such other officers as shall, from time-to-time, be provided by the Board of Directors, who shall perform the usual duties pertaining to their respective offices, except as otherwise specifically provided herein or by resolution of the Board of Directors. One person may hold more than one office except that no person shall be both the President and a Vice President. The Board of Directors may also elect one or more Vice Chairmen of the Board. SECTION 2. QUALIFICATIONS. No person shall be eligible for the Office of Chairman of the Board who is not a Director. Persons who are not Directors or who are not stockholders shall be eligible for all other offices of this Corporation. SECTION 3. TERM OF OFFICE. The officers shall be elected at the first regular meeting of the Board of Directors after the Annual Meeting of Stockholders and shall hold office for one year and until their respective successors have been duly elected and qualified; provided, however, that all officers of this Corporation shall be subject to removal at any time by an affirmative vote of Directors constituting not less than a majority of the Full Board (as defined in Article II, Section 2). SECTION 4. BONDS. The Directors may, by resolution, require any or all of the officers or employees to give bond to this Corporation with good and sufficient surety conditioned upon the faithful performance of their respective duties and offices. SECTION 5. CHAIRMAN OF THE BOARD AND VICE CHAIRMEN. The Chairman of the Board, if one is elected, shall, in addition to his duties as a Director of this Corporation, preside as Chairman at all meetings of the stockholders, of the Board of Directors, and of the Executive Committee. A Vice Chairman (if one or more is elected, in the order designated by the Board of Directors or the Chief Executive Officer) shall, in the absence of the Chairman of the Board, perform the duties of the Chairman of the Board provided for in this Section. SECTION 6. CHIEF EXECUTIVE OFFICER; PRESIDENT. The Chairman of the Board, if so designated by the Board of Directors, shall be the Chief Executive Officer of this Corporation and shall have general supervision of the affairs of this Corporation, being responsible to the Board of Directors. The President shall have general supervision of the operations of this Corporation subject to the supervision of the Chairman of the Board, except that, if the Chairman of the Board shall not also have been designated Chief Executive Officer, or in the absence or incapacity of the Chairman of the Board who has been so designated, the President shall be the Chief Executive Officer of this Corporation and have general supervision of the affairs of this Corporation, being responsible to the Board of Directors. The President shall, in the absence or incapacity of the Chairman and Vice Chairman of the Board, perform the functions of the Chairman of the Board set forth in Section 5 of this Article V. 9 10 SECTION 7. VICE PRESIDENTS. One or more of the Vice Presidents elected may be designated as Executive Vice Presidents. One or more of the Vice Presidents elected may be designated as Senior Vice Presidents. Each of the Vice Presidents, including the Executive Vice Presidents and the Senior Vice Presidents, shall perform such duties as may be prescribed by the Board of Directors or the Chief Executive Officer from time-to-time. In the absence or disability to act of the President, any of the Executive Vice Presidents designated by the Chief Executive Officer or the Board of Directors shall possess all the powers and may perform any of the duties of the Office of the President. In the absence or disability to act of the President and all of the Executive Vice Presidents, such of the Vice Presidents designated by the Chief Executive Officer or the Board of Directors, or in the absence or incapacity of those designated Vice Presidents, any other person(s) designated by the Chief Executive Officer shall possess all of the powers and may perform all of the duties of the President. SECTION 8. SECRETARY. The Secretary, or in his or her absence, the Assistant Secretary, shall issue notices for meetings, shall keep their minutes, shall have charge of the corporate seal and corporate Minute Books, and shall make such reports and perform such other duties as are incident to his or her office or as are properly required of him or her by the Chief Executive Officer or the Board of Directors. SECTION 9. TREASURER. The Treasurer shall have custody of all monies and securities of this Corporation. He or she shall sign or countersign such instruments as require his or her signature and shall perform all duties incident to his or her office or that are properly required of him or her by the Board of Directors or the Chief Executive Officer. He or she shall give bond for the faithful performance of his or her duties in such sum and with such sureties as may be required of him or her by the Board of Directors or the Chief Executive Officer. SECTION 10. CONTROLLER. The Controller shall have custody of all the accounting records of this Corporation and shall keep regular books of account. He or she shall sign or countersign such instruments as require his or her signature and shall perform all duties incident to this office or that are properly required of him or her by the Board of Directors, the Chief Executive Officer or the President. SECTION 11. DELEGATION. In case of the absence of any officer of this Corporation or for any other reason which may seem sufficient to the Board of Directors, the Board of Directors or the Chief Executive Officer may delegate the powers and duties of any such officer to any Director for the time being. ARTICLE VI EXECUTION OF CHECKS AND OTHER INSTRUMENTS 10 11 SECTION 1. The funds of this Corporation shall be deposited in such bank or banks of deposit as shall be designated or authorized by the Board of Directors and in the name of Kellogg Company or such other name as the Board of Directors may designate. All checks, drafts or orders drawn against funds on deposit in any such bank shall be signed by such person or persons as may be authorized by the Board of Directors by a proper resolution spread of record. SECTION 2. All other instruments in writing involving the payment of money or of credit or liability of this Corporation, such as deeds, bonds, contracts, etc., shall be signed in the name of this Corporation by the Chairman of the Board, a Vice Chairman, the President, a Vice President or by such other person or persons as may be authorized by the Board and may be attested, and the corporate seal affixed thereto by either the Secretary or an Assistant Secretary. In the absence of the Secretary and Assistant Secretary, or their inability to act, the Treasurer or Assistant Treasurer may affix the seal. The Board of Directors, the Executive Committee or the Chief Executive Officer may authorize the execution of contracts and other instruments by such other officers, agents and employees as may be selected by them from time-to-time and with such limitations and restrictions as the authorization may require. ARTICLE VII CERTIFICATES OF STOCK SECTION 1. CERTIFICATES OF STOCK. Certificates of stock shall be signed by the Chairman of the Board, the President or a Vice President, and by the Secretary or an Assistant Secretary of this Corporation, both of whose signatures may be a facsimile, and shall be numbered and entered in books of this Corporation as they are issued. They shall, in all respects, conform to the requirements of the law of the State of Delaware, and shall be otherwise in such form as may be prescribed by the Board of Directors. SECTION 2. LOST CERTIFICATES. If any person claims a certificate is lost or destroyed, a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost or destroyed, upon compliance with any terms and conditions which this Corporation may prescribe. ARTICLE VIII TRANSFER OF SHARES 11 12 SECTION 1. TRANSFER OF SHARES. Shares of the capital stock of this Corporation shall be transferred on the books of this Corporation by the owner thereof in person or by his or her attorney upon the surrender and cancellation of certificates for a like number of shares. Upon presentation and surrender of a certificate properly endorsed and payment of all taxes thereon, the transferee shall be entitled to a new certificate or certificates in place thereof. SECTION 2. REGISTRATION. One or more Transfer Agents and Registrars of the Company's stock may be appointed by resolution of the Board of Directors for the transfer and registration of any class or classes of stock of this Corporation, and upon such appointment, no certificate for any such class of stock shall be issued or be valid for any purpose until countersigned by one such Transfer Agent and registered and countersigned by one such Registrar; provided, however, that the countersignature of such Transfer Agent may be a facsimile if such certificate is countersigned manually by a Registrar who shall be other than this Corporation or its employee. SECTION 3. CLOSING OF TRANSFER BOOKS. The Board of Directors shall have the power to close the stock transfer books of this Corporation for a period not exceeding sixty (60) days preceding the date of any meeting of stockholders, or the date of payment of any dividend or other distribution or allotment of any rights, or the effective date of any change, conversion or exchange of stock, or of any other lawful action; provided, however, that in lieu of closing the stock transfer books as aforesaid and in order that this Corporation may determine the stockholders entitled to notice or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days before the date of such meeting, nor more than sixty (60) days prior to any other action, and in such case, such stockholders, and only such stockholders as shall be stockholders of record on the date so fixed, shall be entitled to such notice of, and to vote at, such meeting and any adjournment or adjournments thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of this Corporation after any such record date fixed as aforesaid. A determination of stockholders of record entitled to notice of, or to vote at, a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 4. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of Delaware. 12 13 ARTICLE IX CORPORATE SEAL SECTION 1. CORPORATE SEAL. The corporate seal shall have inscribed thereon in the center the words "Corporate Seal" and the number "1922," and in a circle around the margin the words "Kellogg Company" "Delaware". ARTICLE X DIVIDENDS SECTION 1. DIVIDENDS. Dividends upon the stock of this Corporation shall be payable from funds lawfully available therefor at such times and in such amounts as the Board of Directors, or a Committee thereof expressly authorized by resolution of the Board of Directors may, from time-to-time, direct. ARTICLE XI FISCAL YEAR SECTION 1. FISCAL YEAR. The fiscal year of this Corporation shall begin on the 1st day of January and end on the 31st day of December of each year. ARTICLE XII INSPECTION OF BOOKS SECTION 1. INSPECTION OF BOOKS. The Directors shall determine, from time-to-time whether, and if allowed, when, and under what conditions and regulations, the accounts and books of this Corporation (except such as may, by statute, be specifically open to inspection), or any of them, shall be open to the inspection of the stockholders, and the stockholders' rights in this respect are and shall be restricted and limited accordingly. 13 14 ARTICLE XIII ORDER OF BUSINESS SECTION 1. ORDER OF BUSINESS. At all stockholders' and Directors' meetings, the order of business shall be as determined by the presiding officer of the meeting. ARTICLE XIV AMENDMENT SECTION 1. AMENDMENT. Except to the extent otherwise provided in this Corporation's Restated Certificate of Incorporation, as amended, these Bylaws shall be subject to alteration, amendment or repeal, and new bylaws may be adopted (i) by the affirmative vote of the holders of not less than a majority of the voting power of all of the outstanding shares of capital stock of this Corporation then entitled to vote generally in the election of Directors, voting together as a single class, at any regular or special meeting of the stockholders (but only if notice of the proposed change be contained in the notice to the stockholders of the proposed action), or (ii) by the affirmative vote of not less than a majority of the members of the Board of Directors at any meeting of the Board of Directors at which there is a quorum present and voting; provided, that in the case of clause (ii), any alteration, amendment or repeal made with respect to, or the adoption of, a new bylaw inconsistent with Article II, Section 2 or Section 6, or Article III, Section 1, Section 2, or Section 5, or this Article XIV, Section 1 of these Bylaws, shall require the affirmative vote of Directors constituting not less than two-thirds of the Full Board (as defined in Article II, Section 2). ARTICLE XV INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS; INSURANCE SECTION 1. The Corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of this Corporation), by reason of the fact that he is or was a Director or officer of this Corporation, is or was serving at the request of this Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with 14 15 such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of this Corporation, and, with respect to any criminal action or proceeding, has no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of this Corporation, and, with respect to any criminal action or proceeding, has reasonable cause to believe that his conduct was unlawful. SECTION 2. The Corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened pending or completed action or suit by, or in the right of, this Corporation to procure a judgment in its favor by reason of the fact that he is or was a Director or officer of this Corporation, or, while a Director or officer of this Corporation, is or was serving at the request of this Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of this Corporation, and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to this Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine, upon application, that despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. SECTION 3. The Board of Directors of this Corporation shall have the power, in its discretion, to cause this Corporation to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding referred to in Sections 1 or 2 of this Article by reason of the fact that (although not a Director or officer of this Corporation) he is or was an employee or agent of this Corporation, or is or was serving at the request of this Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise to the extent that any such person would have been entitled to be indemnified under Sections 1 and 2 had he, at all times, been a Director or officer of this Corporation. SECTION 4. Any indemnification under Sections 1, 2 or 3 of this Article (unless ordered by a court) shall be made by this Corporation only as authorized in the specific case upon a determination that indemnification of the Director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 1 or 2. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or, (2) if such a quorum is not obtainable, or, even if 15 16 obtainable, a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. SECTION 5. To the extent that a Director, officer, employee or agent has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1, 2 or 3, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. SECTION 6. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by this Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by, or on behalf of, the Director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by this Corporation as authorized in this Article. SECTION 7. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article, shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may, at any time, be entitled under any bylaw, agreement, vote of stockholders or disinterested Directors, or otherwise, both as to action by a person in his official capacity and as to action in another capacity while holding such office. SECTION 8. The Board of Directors shall have power to authorize and direct the purchase and maintenance of insurance on behalf of itself or any person who is or was a Director, officer, employee or agent of this Corporation, or is or was serving at the request of this Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not this Corporation would have the power to indemnify him against such liability under the provisions of this Article. SECTION 9. For purposes of this Article XV, reference to "this Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its Directors, officers and employees or agents, so that any person who is or was a Director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article XV with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. SECTION 10. For purposes of this Article XV, references to "enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes 16 17 assessed on a person with respect to an employee benefit plan; and references to "serving at the request of this Corporation" shall include any service as a Director, officer, employee or agent of this Corporation which imposes duties on, or involves services by, such Director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of this Corporation" as referred to in this Article XV. SECTION 11. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article, shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a Director, officer, employee or agent, and shall inure to the benefit of the executors, administrators and other legal representatives and heirs of such a person. ARTICLE XVI MISCELLANY SECTION 1. The Chief Executive Officer or the Board of Directors may designate any order of assignment to apply within any specified group of officers where, as provided in these Bylaws, any such designation is to be made as to one or more of such officers. In the event that no such designation is made, the order of assignment within any specified group of officers will be according to the length of service of each particular officer in the specified office, with the officer serving the longest term within that particular office to be assigned first, and in his or her absence or incapacity, the officer serving the next longest term in that particular office to be assigned second, and so on. 17 EX-10.10 4 EXHIBIT 10.10 1 EXHIBIT 10.10 KELLOGG COMPANY SENIOR EXECUTIVE OFFICER PERFORMANCE BONUS PLAN SECTION 1. PURPOSE AND ELIGIBILITY The purpose of this Plan is to motivate the Company's executive officers through awards of annual cash bonuses to achieve strategic, financial and operating objectives, reward their contribution toward improvement in financial performance, provide the executive officers with an additional incentive to contribute to the success of the Company and offer a total compensation package that is competitive in the industry, and to include a bonus component which is intended to qualify as performance-based compensation deductible by the Company under the Code. Such executive officers of the Company as determined by the Compensation Committee of the Board will be eligible to receive payments hereunder. SECTION 2. DEFINITIONS "Award" shall have the meaning set forth in Section 3. "Board" shall mean the Board of Directors of the Company. "Bonus" shall mean a cash award payable to a participant pursuant to the terms of the plan, including an Award. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Committee" shall mean the Compensation Committee of the Board. "Company" shall mean Kellogg Company, a Delaware corporation, and its subsidiaries. "Compensation Survey" shall mean a survey of compensation practices of comparable companies as selected by the Committee. "Corporate Incentive Factor" shall mean the Company's earnings per share (as adjusted for certain extraordinary or non-recurring items) as compared to the pre-established target earnings per share. "Covered Employees" shall mean participants designated by the Committee prior to the award of a Bonus opportunity hereunder who are or are expected to be "covered employees" within the meaning of Section 162(m) of the Code for the Measurement Period in which a Bonus hereunder is payable. "Disinterested Person" shall mean a member of the Board who qualifies as an "outside director" for purposes of Section 162(m) of the Code. "Measurement Period" shall mean a period of one fiscal year, unless a shorter period is otherwise selected and established in writing by the Committee at the time the Performance Goals are established with respect to a particular Award. 1 2 "Net Income" shall mean net income available for common stockholders as reported in the Company's audited financial statements, but not including extraordinary items and the cumulative effect of accounting changes. "Payment Date" shall mean the date following the conclusion of a particular Measurement Period on which the Committee certifies that applicable Performance Goals have been satisfied and authorizes payment of corresponding Bonuses. "Performance Goals" shall have the meaning set forth in Section 3 hereof. SECTION 3. ADMINISTRATION AND CALCULATION OF AWARDS The Plan shall be administered by the Committee, consisting of Disinterested Persons, in conformance with Section 162(m) of the Code ("Section 162(m)"). Any action by the Committee that would be violative of Section 162(m) shall be void. The Committee shall have the authority to determine eligibility of executive officers and the financial and other performance criteria applicable to the maximum potential recommended bonus (the "Award) which a participating executive officer may receive for services performed during that year. Target awards, which are a percentage of the midpoint of the applicable salary range, shall be determined using as an objective the 75th percentile of the Compensation Survey. Recommended Awards shall be determined by adjusting the target awards based on individual performance factors. The result is then adjusted further based on the Corporate Incentive Factor. This adjustment of the recommended bonus may result in a bonus payment ranging from 0% to 150% of the recommended bonus. The Committee shall evaluate individual performance by such performance factors as it deems appropriate. The performance factors shall be determined by the Committee in advance of each Measurement Period or such period as may be permitted by the regulations issued under Section 162(m),and may include long-term financial and non-financial objectives and Company performance ("Performance Goals"). With respect to the Chief Executive Officer, the factors shall be the same as those utilized by the Committee in its annual determination of performance including the Company's earnings per share, return on equity, return on assets, growth in sales and earnings, market share and total return to stockholders (including both the market value of the Company's stock and dividends thereon) and the extent to which strategic and business plan goals are met. Awards are based on the achievement of such performance criteria. Negative discretion may be used by the Committee to reduce the Award. In no event, however, will an exercise of negative discretion to reduce the Award of a participating executive officer have the effect of increasing the amount of an Award otherwise payable to any other participating executive officer. SECTION 4. MAXIMUM BONUS AWARDS The total of all Awards payable to any Covered Employee shall not under any circumstances exceed 3/4 of 1 percent (.0075) of the Net Income of the Company (the "Maximum Bonus Awards Pool") and no one individual may receive more than 60% of such pool. In the event that the total of all Awards payable to Covered Employees should exceed the Maximum Bonus Awards Pool as specified above. The Award of each Covered Employee will be proportionately reduced such that the total of all such Awards paid is equal to the Maximum Bonus Awards Pool. SECTION 5. PAYMENT OF AWARDS If the Performance Goals established by the Committee are satisfied and upon written certification by the Committee that the Performance Goals have been satisfied, payment shall be made on the Payment Date in accordance with the terms of the Award unless the Committee determines in its sole discretion to reduce the payment to be made. 2 3 SECTION 6. TERMINATION OF EMPLOYMENT In the event that a participating executive officer's employment with the Company terminates for any reason prior to the Payment Date with respect to any Bonus, the balance of any Bonus which remains unpaid at the time of such termination shall be payable to the participant, or forfeited by the participant, in accordance with the terms of the Award granted by the Committee; provided, however, that no amount shall be payable unless the Performance Goals are satisfied unless the termination of employment of the Covered Employee is due to death or disability. Participating executive officers who remain employed through the Measurement Period but are terminated prior to the Payment Date shall be entitled to receive Bonuses payable with respect to such Measurement Period. SECTION 7. AMENDMENT AND TERMINATION The Board shall have the right to modify the Plan from time to time but no such modification shall, without prior approval of the Company's stockholders, change Section 3 of this Plan, alter the business criteria on which the Performance Goals may be based or to increase the amount set forth in Section 4, materially increase the amount available for Awards, materially increase the benefits accruing to participating executive officers, materially modify the requirements regarding eligibility for participation in the Plan or, without the consent of the participant affected, impair any Award made prior to the effective date of the modification. SECTION 8. MISCELLANEOUS Bonus payments shall be made from the general funds of the Company and no special or separate fund shall be established or other segregation of assets made to assure payment. No participant or other person shall have under any circumstances any interest in any particular property or assets of the Company. The Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its principles of conflict of laws. Neither the establishment of this Plan nor the payment of any Award hereunder nor any action of the Company or the Committee with respect to this Plan shall be held or construed to confer upon any participating executive officer any legal right to be continued in the employ of the Company or to receive any particular rate of cash Compensation other than pursuant to the terms of this Plan and the determination of the Committee, and the Company expressly reserves the right to discharge any participating executive officer whenever the interest of the Company may so permit or require without liability to the Company, the Board of Directors or the Committee, except as to any rights which may be expressly conferred upon a participating executive officer under this Plan. The adoption of this Plan shall not affect any other compensation plans in effect for the Company or any subsidiary or affiliate of the Company, nor shall the Plan preclude the Company or any subsidiary or affiliate thereof from establishing any other forms of incentive or other compensation for the participating executive officers. SECTION 9. EFFECTIVE DATE This Plan shall become effective upon approval by the stockholders. 3 EX-13.01 5 EXHIBIT 13.01 1 EXHIBIT 13.01 SELECTED FINANCIAL DATA (millions, except per share data) SUMMARY OF OPERATIONS
======================================================================================================== EARNINGS (a) BEFORE (a)(b) NET % OPERATING % ACCOUNTING % NET % SALES GROWTH PROFIT GROWTH CHANGE GROWTH EARNINGS GROWTH - -------------------------------------------------------------------------------------------------------- 10-year Compound Growth Rate 9% 4% 6% 6% 1995 $7,003.7 7 $837.5 (28) $490.3 (30) $490.3 (30) 1994 6,562.0 4 1,162.6 16 705.4 4 705.4 4 1993 6,295.4 2 1,004.6 (5) 680.7 - 680.7 58 1992 6,190.6 7 1,062.8 3 682.8 13 431.2 (29) 1991 5,786.6 12 1,027.9 16 606.0 21 606.0 21 1990 5,181.4 11 886.0 21 502.8 19 502.8 7 1989 4,651.7 7 732.5 (8) 422.1 (12) 470.2 (2) 1988 4,348.8 15 794.1 15 480.4 21 480.4 21 1987 3,793.0 14 691.2 7 395.9 24 395.9 24 1986 3,340.7 14 647.4 16 318.9 13 318.9 13 1985 2,930.1 13 558.4 21 281.1 12 281.1 12 ========================================================================================================
============================================================================================ PER COMMON SHARE DATA (c) ------------------------------------------- EARNINGS BEFORE (a)(b) AVERAGE ACCOUNTING NET CASH BOOK SHARES SHAREHOLDERS' CHANGE EARNINGS DIVIDENDS VALUE OUTSTANDING EQUITY - -------------------------------------------------------------------------------------------- 10-year Compound Growth Rate 7% 7% 13% 1995 $2.24 $2.24 $1.50 $7.34 219.2 $1,590.9 1994 3.15 3.15 1.40 8.15 224.2 1,807.5 1993 2.94 2.94 1.32 7.52 231.5 1,713.4 1992 2.86 1.81 1.20 8.20 238.9 1,945.2 1991 2.51 2.51 1.075 8.98 241.2 2,159.8 1990 2.08 2.08 .96 7.88 241.6 1,901.8 1989 1.73 1.93 .86 6.70 244.2 1,634.4 1988 1.95 1.95 .76 6.03 246.4 1,483.2 1987 1.60 1.60 .64 4.91 247.4 1,211.4 1986 1.29 1.29 .51 3.63 247.0 898.4 1985 1.14 1.14 .45 2.77 246.6 683.0 ============================================================================================
OTHER INFORMATION AND FINANCIAL RATIOS
============================================================================================================ PROPERTY, CAPITAL TOTAL ADVERTISING R&D NUMBER OF NET EXPENDITURES DEPRECIATION ASSETS EXPENSE EXPENSE EMPLOYEES - ------------------------------------------------------------------------------------------------------------ 1995 $2,784.8 $315.7 $258.8 $4,414.6 $891.5 $72.2 14,487 1994 2,892.8 354.3 256.1 4,467.3 856.9 71.7 15,657 1993 2,768.4 449.7 265.2 4,237.1 772.4 59.2 16,151 1992 2,662.7 473.6 231.5 4,015.0 782.3 56.7 16,551 1991 2,646.5 333.5 222.8 3,925.8 708.3 34.7 17,017 1990 2,595.4 320.5 200.2 3,749.4 648.5 38.3 17,239 1989 2,406.3 508.7 167.6 3,390.4 611.4 42.9 17,268 1988 2,131.9 538.1 139.7 3,297.9 560.9 42.0 17,461 1987 1,738.8 478.4 113.1 2,680.9 486.9 40.0 17,762 1986 1,281.1 329.2 92.7 2,084.2 355.6 38.2 17,383 1985 1,035.9 245.6 75.4 1,726.1 302.2 33.9 17,082 ============================================================================================================
========================================================================================================= FINANCIAL RATIOS ------------------------------------------- PRETAX CASH (USED IN)/ INTEREST RETURN ON DEBT TO CASH PROVIDED BY CURRENT COVERAGE AVERAGE TOTAL PROVIDED BY FINANCING LONG-TERM RATIO (TIMES) EQUITY CAPITAL OPERATIONS ACTIVITIES DEBT - --------------------------------------------------------------------------------------------------------- 1995 1.1 12 29% 36% $1,041.0 ($759.2) $717.8 1994 1.2 23 40% 36% 966.8 (559.5) 719.2 1993 1.0 27 37% 35% 800.2 (464.2) 521.6 1992 1.2 33 21% 21% 741.9 (422.6) 314.9 1991 .9 17 30% 18% 934.4 (537.7) 15.2 1990 .9 10 28% 26% 819.2 (490.9) 295.6 1989 .9 10 30% 34% 533.5 (143.2) 371.4 1988 .9 14 36% 32% 492.3 52.1 272.1 1987 .9 14 38% 27% 523.5 (130.5) 290.4 1986 1.1 13 40% 31% 542.7 (144.1) 264.1 1985 1.4 11 48% 38% 449.7 (384.4) 392.6 =========================================================================================================
(a) Operating profit for 1995 includes non-recurring charges of $421.8 million ($271.3 million after tax or $1.24 per share). Operating profit for 1993 includes non-recurring charges of $64.3 million ($41.1 million after tax or $.18 per share). See Management's Discussion and Analysis on pages 16-19 and Note 4 within Notes to Consolidated Financial Statements for further explanation. (b) Effective January 1, 1992, the Company adopted Statement of Financial Accounting Standards (SFAS) #106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The transition effect of adopting SFAS #106 on the immediate recognition basis, as of January 1, 1992, resulted in a charge of $251.6 million ($1.05 per share) to 1992 earnings, net of $144.6 million of income tax benefit. The Company adopted SFAS #106 on a worldwide basis; however, costs associated with subsidiaries outside North America are insignificant. Net earnings for 1989 include a $48.1 million gain ($.20 per share) resulting from the adoption of SFAS #96, "Accounting for Income Taxes," as of January 1, 1989. (c) All per share data retroactively restated to reflect 2 for 1 stock splits in 1991 and 1986. 15 2 MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS 1995 COMPARED TO 1994 Kellogg revenues are generated from the sale of ready-to-eat cereals and other grain-based convenience foods in nearly 160 countries. During 1995, the Company continued to demonstrate strong global market leadership with a 42% annual share of worldwide cereal category volume; 36% in North America, 48% in Europe, 48% in Asia-Pacific, and 69% in Latin America. 1995 was a year in which the Company took major steps to position itself for the future, initiating various programs to streamline operations and improve productivity. These initiatives, and related non-recurring charges incurred, are described below. Excluding these non-recurring charges, the Company exhibited strong increases in earnings and earnings per share, driven by a return to growth in the U.S. cereal business, low double-digit volume growth in other convenience foods, and an aggressive focus on cost efficiencies. [GRAPH] 1995 Geographic Net Sales - The 1995 Geographic Net Sales graph shows in pie chart form, the relative proportion of the Company's 1995 net sales attributable to major geographic segments as follows: United States 58%, Europe 26%, Other 16%. [END GRAPH] Consolidated net sales increased 7% over 1994, principally from volume growth and product mix improvements. On a geographic basis, sales increased 6% in the U.S., 9% in Europe, and 5% in all other areas. Foreign currency movements had an insignificant effect on consolidated net sales, but contributed favorably by 7% in Europe and unfavorably by 13% in other non-U.S. areas, primarily due to the significant currency devaluation in Mexico. The Company's total volume was up 4% versus the prior year. Excluding results of divested businesses, total volume increased 5%. Despite intense competitive pressure in all developed markets, Kellogg's global cereal volume grew 3% during 1995, driven by shipment increases in North American, Continental Europe, and Asia-Pacific markets. Latin America experienced slightly lower shipments, as a volume reduction in Mexico, resulting from the effect on the local economy of 1994's peso devaluation, was partially offset by strong growth in other Latin American markets. Other convenience foods volume growth was driven by strong sales of new products in the North American market, where the Company continues to hold the number one position in dollar sales in the toaster pastry, cereal/granola bar, and frozen waffle categories. The gross profit margin decreased to 54.6% from 55.0% in 1994, primarily due to changes in product mix and higher costs in North American operations. Management expects 1996 margins to be in line with 1995, with increased plant efficiencies and productivity improvements helping to offset continued pressure from higher raw material and packaging costs. Selling and administrative expense for 1995 was up 5% over 1994, and represented 36.6% of net sales, down .7 percentage points from the prior year. The decrease in selling and administrative expense as a percentage of net sales reflects the Company's continued emphasis on cost containment and carefully managed marketing spending. In line with the Company's long-term strategy, which was initiated in early 1994, there has been a shift over the last two years from price promotion on established brands toward advertising and other brand value-building activities. Management believes that this strategy, combined with a strong new-product development program, will assist in adding further value to the Company's brand portfolio, thereby delivering long-term profitable growth.
================================================================================================================ Operating Profit by Area United (millions) States Europe Other Consolidated - ---------------------------------------------------------------------------------------------------------------- 1995 operating profit as reported $443.1 $293.6 $100.8 $ 837.5 Non-recurring charges 325.0 38.4 58.4 421.8 - ---------------------------------------------------------------------------------------------------------------- Operating profit excluding non-recurring charges $768.1 $332.0 $159.2 $1,259.3 - ---------------------------------------------------------------------------------------------------------------- 1994 operating profit as reported $708.5 $287.5 $166.6 $1,162.6 - ---------------------------------------------------------------------------------------------------------------- % growth - 1995 versus 1994, excluding non-recurring charges +8% +15% -4% +8% ================================================================================================================
Operating profit, excluding non-recurring charges of $421.8 million, increased 8% to $1.26 billion. Operating profit, excluding the charges, was up 8% in the U.S., up 15% in Europe, and down 4% in all other areas. Excluding both non-recurring charges and foreign currency impact, operating profit was up 7% in Europe and up 18% in other non-U.S. areas. While foreign currency movements had a significant impact on geographic results, the net unfavorable impact on consolidated operating profit was only 1%. Gross interest expense, prior to amounts capitalized, increased to $69.8 million for 1995, up $17.5 million from 1994, due primarily to increased interest rates on short-term borrowings. This increase in interest expense was substantially offset by increases in interest income due to higher average cash balances throughout the year. The Company expects interest expense during 1996 to remain at 1995 levels. Other income for 1994 included a gain of $21.1 million ($13.3 million after tax or $.06 per share) from the sale of the Mrs. Smith's Frozen Foods pie business. Other 16 3 expense for 1994 included a charge of $20.5 million ($13.1 million after tax or $.06 per share), primarily from the initial funding of the Kellogg's Corporate Citizenship Fund, a private trust established for charitable donations. The Company's effective income tax rate for the year, excluding the effect of non-recurring charges, was 37.5%, .1 percentage point lower than the comparable rate for 1994. The Company expects its effective income tax rate for 1996 to remain between 37% and 38%. The Company's effective income tax rate for 1995, including the effect of non-recurring charges, was 38.4%. Earnings per share for 1995 were $2.24, compared to $3.15 in 1994. Net earnings were $490.3 million versus $705.4 million for the prior year. Excluding all non-recurring events for both years, net earnings for 1995 were $761.6 million, up 8%, and earnings per share were $3.48, up 10% or $.33 over 1994, derived from $.31 in business growth, $.05 in share repurchase, and $.01 in tax rate reduction, partially offset by a $.04 negative foreign currency exchange effect. Foreign currency movements contributed favorably to net earnings by 6% in Europe and unfavorably by 21% in other non-U.S. areas, netting to an unfavorable consolidated impact of only 1%. [GRAPH] Drivers of EPS Growth - 1995 vs. 1994 (excluding non-recurring events) - The Drivers of EPS Growth graph shows, in a stacked single cylinder form, the relative contributions to the Company's 1995 earnings per share increase versus 1994, excluding non-recurring events in both periods. The drivers were Business Growth, Share Repurchase, Tax Rate, and Foreign Exchange for $.31, $.05, $.01, and ($.04), respectively. [END GRAPH] 1994 COMPARED TO 1993 Consolidated 1994 net sales increased 4% over 1993, principally from higher selling prices and, to a lesser extent, product mix improvements and lower trade spending. Excluding the results of the Mrs. Smith's Frozen Foods pie business, divested during the first quarter of 1994, and the Argentine snack business, divested during the fourth quarter of 1993, consolidated 1994 net sales increased 7%. On a geographic basis, excluding the results of divested businesses, sales increased 5% in the U.S., 9% in Europe, and 9% in all other areas. The Company's total volume was down 2% in 1994 versus 1993. However, excluding results of divested businesses, total volume increased 2% over 1993, buoyed by strong growth in the U.S. convenience foods market. Kellogg's global cereal volume grew 1% during 1994, with a volume decline in the U.S. cereal market more than offset by volume growth in non-U.S. markets. The volume decline in the U.S. cereal market reflected competitive pressure and the Company's introduction of its new strategy on pricing and market spending. The gross profit margin strengthened to 55.0%, up 2 percentage points over 1993. This increase in gross margin was the result of favorable pricing, combined with cost containment programs and productivity improvements which held cost of goods sold essentially flat on a per-kilo basis. Selling and administrative expense for 1994 was up 9% over 1993, and was 37.3% of net sales, up one percentage point from the prior year, representing investment in value-added marketing and new-product research and development. Operating profit was $1.16 billion, up 9% from 1993 operating profit, excluding non-recurring charges. Excluding the results of divested businesses and non-recurring charges, operating profit was up 11% in total, 10% in the U.S., 15% in Europe, and 11% in all other areas. Foreign currency movements contributed favorably by 3% in Europe and less than 1% in other non-U.S. areas. Reported operating profit for 1993 was $1.00 billion and included non-recurring charges of $64.3 million ($41.1 million after tax or $.18 per share) principally from the write-down of certain assets in Europe and North America. Other income for 1993 included a gain of $32.2 million ($24.1 million after tax or $.10 per share) from the sale of Cereal Packaging Ltd., a wholly owned subsidiary of Kellogg Company of Great Britain Ltd., and a gain of $33.7 million ($22.2 million after tax or $.10 per share) from the sale of the Company's Argentine snack food business. Gross interest expense, prior to amounts capitalized, increased to $52.3 million for 1994 compared to $40.4 million for 1993, due to higher debt levels, incurred primarily to fund common stock repurchases, and increased interest rates on short-term borrowings. The Company's effective income tax rate for the year was 37.6%, 3.4 percentage points higher than the comparable rate for 1993. A primary factor contributing to this variance was the one-time favorable impact of statutory rate reductions in several foreign jurisdictions during 1993. Earnings per share for 1994 were $3.15, up 7%. Net earnings were $705.4 million, an increase of 4%. Excluding all non-recurring events and the results of divested businesses, earnings per share for 1994 were $3.16, up 10% over 1993, and net earnings were $708.8 million, up 7%. 17 4 LIQUIDITY AND CAPITAL RESOURCES The financial condition of the Company remained strong during 1995. Consistent with historical results, operations provided a strong, positive cash flow during 1995 which resulted in net cash provided from operations of $1.04 billion, principally due to higher net earnings, adjusted for the non-cash components of non-recurring events, and improved working capital management. The strong cash flow, combined with a program of issuing commercial paper and maintaining worldwide credit facilities, provides adequate liquidity to meet the Company's operational needs. The Company maintains credit facilities with banking institutions in the United States and other countries where it conducts business. At year-end, the Company had $623.5 million of short-term lines of credit, of which $607.9 million were available. The ratio of current assets to current liabilities was 1.1:1.0 as of December 31, 1995, and 1.2:1.0 at December 31, 1994. Net cash used in investing activities for 1995 was $308.9 million, primarily related to capital spending of $315.7 million. Capital expenditures decreased by $38.6 million from $354.3 million during 1994, reflecting the Company's application of value-based management principles and the ongoing strategy of improving return on invested capital. Over the past several years, investment has been focused on gaining entrance to relatively untapped markets, which are expected to provide significant long-term growth potential in ready-to-eat cereal and other convenience foods consumption. As a result, the Company opened new plants in Latvia in 1993, India in 1994, China and Argentina in 1995, and commenced construction of a new plant in Thailand in early 1996. Also, construction began in 1995 on the Company's new food research center, the W. K. Kellogg Institute, located in Battle Creek, Michigan. This facility is expected to be completed in 1997 with a total investment of approximately $65 million. Management anticipates that 1996 capital expenditures will be $300-$350 million. Net cash used in financing activities was $759.2 million related primarily to common stock repurchases and dividends. During 1995, the Company spent $374.7 million to purchase 5,684,864 shares of its common stock, contributing $.05 to earnings per share growth over that time period. Stock repurchases are made under plans authorized by the Company's Board of Directors. On September 21, 1995, the Board authorized the additional purchase of up to $400 million in Company stock through December 31, 1996. As of December 31, 1995, the total remaining authorized purchase amount was $350.7 million. Market conditions permitting, management intends to fully utilize this authorization by the end of 1996. [GRAPH] Stock Repurchased Since 1984 (based on shares outstanding at 12/31/83) - The Stock Repurchased Since 1984 graph shows in pie chart form the relative proportion of the Company's Common Stock repurchased versus outstanding as a percentage of shares outstanding at 12/31/83. Common Stock repurchased and outstanding were 31% and 69% respectively. [END GRAPH] Dividends paid per share of common stock increased 7% to $1.50 in 1995, marking the 39th consecutive year of increase. Management believes the trend of increased dividends will continue in 1996. Total dividends paid during 1995 were $328.5 million. Long-term debt outstanding at year-end 1995 consisted principally of $200 million of three-year notes issued in 1994, $200 million of five-year notes issued in 1993, and $300 million of five-year notes issued in 1992. Short-term debt outstanding at year-end 1995 and 1994 consisted principally of U.S. commercial paper. The Company continues to enjoy the highest available debt ratings on both its long-term debt and commercial paper. The Company's net debt position (long-term debt plus notes payable less cash) at December 31, 1995, was $685.8 million, down $42.8 million from December 31, 1994, as the increase in operating cash flow during the year allowed the Company to reduce short-term debt. The ratio of debt to total capitalization was 36%, unchanged from December 31, 1994. At December 31, 1995, the Company had available an unused "shelf registration" of $200 million with the Securities and Exchange Commission to provide for the issuance of debt in the United States. The proceeds of such an offering would be added to the Company's working capital and be available for general corporate purposes. NON-RECURRING CHARGES Management's objective to maximize shareholder value includes a constant reassessment of its business strategies. The Company's commitment to be positioned for future success was the basis of several initiatives announced during 1995 to improve productivity and streamline global operations. During 1995, the Company recorded total non-recurring charges of $421.8 million ($271.3 million after tax or $1.24 per share), primarily related to streamlining initiatives. Approximately 2,000 employee positions will be eliminated by the end of 1996, nearly 13% of the global workforce at December 1994, through a combination of voluntary early retirement incentives, and voluntary and involuntary severance programs. These initiatives required pre-tax cash outlays of approximately $40 million in 1995 and will require additional cash outlays of approximately $120 to $130 million in 1996. The Company expects to realize approximately $120 million of annual pre-tax savings by 1997, with about 60% of this amount being achieved in 1996. These savings are not necessarily indicative of future incremental earnings due to management's commitment to hold product pricing below the 18 5 rate of inflation, while investing in competitive business strategies, new markets, and growth opportunities. During the first half of 1995, plans were announced to improve manufacturing efficiency in the U.S., Australia, and Great Britain. As a result, the Company reported total pre-tax charges during the second quarter of $52.8 million related primarily to severance and early retirement programs which eliminated 475 employee positions. During the fourth quarter, the Company reported pre-tax charges totaling $369.0 million, comprised of $295.2 million to further streamline operations and $73.8 million for asset impairment losses. The streamlining initiatives were primarily related to hourly workforce and capacity realignments in the Company's U.S., European, and Australian manufacturing operations. Approximately 50% of the streamlining charges relate to employee retirement and severance benefits, with the remainder consisting principally of asset write-off and removal costs resulting from a plant closing in San Leandro, California, and production realignments in other locations. The asset impairment losses of $73.8 million consisted principally of the write-down of certain operating assets in North America and the Asia-Pacific region, and resulted from the evaluation of the Company's ability to recover asset costs given changes in local market conditions, sourcing of products, and other strategic factors. Associated with the 1995 streamlining efforts were additional costs incurred to redeploy manufacturing and employee resources. The charges reported included total expenses of $18 million incurred for employee retraining and relocation, consulting, and relocated production line start-up. The Company expects an additional $30 million of similar costs in 1996 which will be recorded as non-recurring charges as incurred. These additional costs are included in the estimated cash outlay figures for 1996 stated above. The Company continues to focus on optimizing its worldwide efficiency through improvements in its manufacturing, marketing, logistics, and customer service processes while lowering costs and more effectively utilizing human and financial resources. In early 1996, the Company commenced a plan to consolidate and reorganize certain aspects of its European operations to better serve the Pan-European marketplace. Also, the Company intends to further streamline operations in Australia. As a result, the Company expects to incur pre-tax non-recurring charges during 1996 of approximately $45 to $70 million related to these initiatives. The foregoing is a forward-looking statement. Actual amounts may vary depending on the final determination of important factors such as the magnitude of centralization of operations, the number of employees affected and the type of separation programs, product sourcing reviews, asset utilization analyses, and other items which have yet to be determined. In addition, the recognition of these charges will be dependent upon the timing of management approvals of elements of the reorganization plan and specific communications to employees. For all of the initiatives described above, the combined non-recurring charges expected to be recognized during 1996 are $75 to $100 million. Refer to Note 4 to the consolidated financial statements for further explanation of non-recurring charges. 1996 OUTLOOK Management anticipates that 1996 will be another year of growth for the Company, achieved through increases in global volume, the continuation of product pricing below inflation, continual improvements in operating efficiencies, strong cash flows, and continued share repurchase activity. The Company's business environment remains highly competitive around the world. Management is not aware of any adverse trends that would materially affect the Company's strong financial position. Should suitable investment opportunities or working capital needs arise that would require additional financing, management believes that the Company's triple A credit rating, strong balance sheet, and its solid earnings history provide a base for obtaining additional financial resources at competitive rates and terms. NEW ACCOUNTING PRONOUNCEMENTS In March 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) #121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". This new standard requires that long-lived assets be reviewed for impairment whenever the carrying amount of that asset may not be recoverable. The recoverability is based on the estimated future cash flows resulting from the use of the asset. Adoption of SFAS #121 is required in 1996. The Company does not expect the adoption of SFAS #121 to have a significant impact on the Company's financial condition or results of operations. In October 1995, the FASB issued SFAS #123, "Accounting for Stock-based Compensation". This new standard encourages, but does not require, a fair-value based method of accounting for stock-based compensation plans. Adoption of the disclosure requirements of SFAS #123 is required in 1996. The Company has decided to adopt only the disclosure provisions of SFAS #123 and, therefore, there will be no impact on the Company's financial condition or results of operations. 19 6 Kellogg Company and Subsidiaries CONSOLIDATED EARNINGS AND RETAINED EARNINGS Year ended December 31,
=============================================================================================== (millions, except per share data) 1995 1994 1993 - ----------------------------------------------------------------------------------------------- NET SALES $7,003.7 $6,562.0 $6,295.4 - ----------------------------------------------------------------------------------------------- Cost of goods sold 3,177.7 2,950.7 2,989.0 Selling and administrative expense 2,566.7 2,448.7 2,237.5 Non-recurring charges 421.8 - 64.3 - ----------------------------------------------------------------------------------------------- OPERATING PROFIT 837.5 1,162.6 1,004.6 - ----------------------------------------------------------------------------------------------- Interest expense 62.6 45.4 33.3 Other income (expense), net 21.1 12.8 62.8 - ----------------------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAXES 796.0 1,130.0 1,034.1 Income taxes 305.7 424.6 353.4 - ----------------------------------------------------------------------------------------------- NET EARNINGS - $2.24, $3.15, $2.94 PER SHARE 490.3 705.4 680.7 Retained earnings, beginning of year 3,801.2 3,409.4 3,033.9 Dividends paid - $1.50, $1.40, $1.32 per share (328.5) (313.6) (305.2) - ----------------------------------------------------------------------------------------------- RETAINED EARNINGS, END OF YEAR $3,963.0 $3,801.2 $3,409.4 ===============================================================================================
See notes to consolidated financial statements. 20 7 Kellogg Company and Subsidiaries CONSOLIDATED BALANCE SHEET At December 31,
======================================================================================================= (millions, except share data) 1995 1994 - ------------------------------------------------------------------------------------------------------- CURRENT ASSETS Cash and cash equivalents $ 221.9 $ 266.3 Accounts receivable, less allowances of $6.4 and $6.2 590.1 564.5 Inventories 376.7 396.3 Other current assets 240.1 206.4 - ------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 1,428.8 1,433.5 - ------------------------------------------------------------------------------------------------------- PROPERTY, NET 2,784.8 2,892.8 OTHER ASSETS 201.0 141.0 - ------------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 4,414.6 $ 4,467.3 ======================================================================================================= CURRENT LIABILITIES Current maturities of long-term debt $ 1.9 $ .9 Notes payable 188.0 274.8 Accounts payable 370.8 334.5 Accrued liabilities 704.7 575.0 - ------------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 1,265.4 1,185.2 - ------------------------------------------------------------------------------------------------------- LONG-TERM DEBT 717.8 719.2 OTHER LIABILITIES 840.5 755.4 SHAREHOLDERS' EQUITY Common stock, $.25 par value, 330,000,000 shares authorized Issued: 311,128,152 shares in 1995 and 310,356,488 in 1994 77.8 77.6 Capital in excess of par value 105.2 68.6 Retained earnings 3,963.0 3,801.2 Treasury stock, at cost: 94,423,270 shares in 1995 and 88,655,238 in 1994 (2,361.2) (1,980.6) Currency translation adjustment (193.9) (159.3) - ------------------------------------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 1,590.9 1,807.5 - ------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,414.6 $ 4,467.3 =======================================================================================================
See notes to consolidated financial statements. 21 8 Kellogg Company and Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS Year ended December 31,
================================================================================================ (millions) 1995 1994 1993 - ------------------------------------------------------------------------------------------------ OPERATING ACTIVITIES Net earnings $ 490.3 $ 705.4 $ 680.7 Items in net earnings not requiring (providing) cash: Depreciation 258.8 256.1 265.2 Pre-tax gain on sale of subsidiaries -- (26.7) (65.9) Deferred income taxes (78.7) 24.5 (22.3) Non-recurring charges, net of cash paid 385.3 -- 64.3 Other 9.1 22.2 15.6 Pension contributions (74.5) (71.5) (68.0) Changes in operating assets and liabilities 50.7 56.8 (69.4) - ------------------------------------------------------------------------------------------------ NET CASH PROVIDED FROM OPERATING ACTIVITIES 1,041.0 966.8 800.2 - ------------------------------------------------------------------------------------------------ INVESTING ACTIVITIES Additions to properties (315.7) (354.3) (449.7) Proceeds from sale of subsidiaries -- 95.5 95.6 Property disposals 6.3 15.6 19.0 Other .5 7.8 (25.1) - ------------------------------------------------------------------------------------------------ NET CASH USED IN INVESTING ACTIVITIES (308.9) (235.4) (360.2) - ------------------------------------------------------------------------------------------------ FINANCING ACTIVITIES Net borrowings of notes payable (86.8) (111.9) 176.7 Issuance of long-term debt -- 200.0 208.3 Reduction in long-term debt (.4) (2.9) (1.7) Issuance of common stock 36.8 2.3 2.9 Common stock repurchases (374.7) (327.3) (548.1) Cash dividends (328.5) (313.6) (305.2) Other (5.6) (6.1) 2.9 - ------------------------------------------------------------------------------------------------ NET CASH USED IN FINANCING ACTIVITIES (759.2) (559.5) (464.2) - ------------------------------------------------------------------------------------------------ Effect of exchange rate changes on cash (17.3) (3.7) (4.0) - ------------------------------------------------------------------------------------------------ Increase (decrease) in cash and cash equivalents (44.4) 168.2 (28.2) Cash and cash equivalents at beginning of year 266.3 98.1 126.3 - ------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS AT END OF YEAR $ 221.9 $ 266.3 $ 98.1 ================================================================================================
See notes to consolidated financial statements. 22 9 KELLOGG COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 ACCOUNTING POLICIES Consolidation The consolidated financial statements include the accounts of Kellogg Company and its majority-owned subsidiaries. Intercompany balances and transactions are eliminated. Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. Cash and cash equivalents Highly liquid temporary investments with original maturities of less than three months are considered to be cash equivalents. The carrying amount approximates fair value. Inventories Inventories are valued at the lower of cost (principally average) or market. Property Fixed assets are recorded at cost and depreciated over estimated useful lives using straight-line methods for financial reporting and accelerated methods for tax reporting. Cost includes an amount of capitalized interest associated with significant capital additions. Advertising The costs of advertising are generally expensed as incurred. Net earnings per share Net earnings per share is determined by dividing net earnings by the weighted average number of common shares outstanding during the period. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2 LEASES Operating leases generally are for equipment and warehouse space. Rent expense on all operating leases, which generally are renewable at the Company's option, was $32.0 million in 1995, $37.5 million in 1994, and $43.7 million in 1993. At December 31, 1995, future minimum annual rental commitments under non-cancelable operating leases totalled $47.4 million consisting of $15.7 million for 1996, $11.0 million for 1997, $6.2 million for 1998, $4.1 million for 1999, $3.6 million for 2000, and $6.8 million in later years. NOTE 3 OTHER INCOME AND EXPENSE Other income and expense includes non-operating items such as interest income, foreign exchange gains and losses, and charitable donations. Other income for 1994 includes a gain of $21.1 million ($13.3 million after tax or $.06 per share) from the sale of the Mrs. Smith's Frozen Foods pie business to The J. M. Smucker Co. Other expense for 1994 includes a charge of $20.5 million ($13.1 million after tax or $.06 per share) primarily from the initial funding of the Kellogg's Corporate Citizenship Fund, a private trust established for charitable donations. Other income for 1993 includes a gain of $32.2 million ($24.1 million after tax or $.10 per share) from the sale of Cereal Packaging, Ltd., a wholly owned subsidiary of Kellogg Company of Great Britain, Ltd., and a gain of $33.7 million ($22.2 million after tax or $.10 per share) from the sale of the Argentine snack food business. NOTE 4 NON-RECURRING CHARGES Operating profit for 1995 includes total non-recurring charges of $421.8 million ($271.3 million after tax or $1.24 per share), comprised of $348.0 million related to streamlining initiatives and $73.8 million for asset impairment losses. The streamlining initiatives primarily concerned operational workforce and capacity realignments in the U.S., Australia, and Europe, eliminating approximately 2,000 employee positions by the end of 1996 through a combination of voluntary early retirement incentives, and voluntary and involuntary severance programs. These initiatives required pre-tax cash outlays of approximately $40 million in 1995 and will require additional cash outlays of approximately $120 to $130 million in 1996. The Company expects to realize approximately $120 million of annual pre-tax savings by 1997, with about 60% of this amount being achieved in 1996. Associated with the 1995 streamlining efforts were additional costs incurred to redeploy manufacturing and employee resources. The charges reported included total expenses of $18 million incurred for employee retraining and relocation, consulting, and relocated production line start-up. The Company expects an additional $30 million of similar costs in 1996 which will be recorded as non-recurring charges as incurred. These additional costs are included in the estimated cash outlay figures for 1996 stated above. The components of the streamlining charges, as well as reserve balances remaining at December 31, 1995, were:
========================================================================================= Amounts charged --------------------------- Amounts Remaining (millions) Cash Non-cash Total utilized reserve - ----------------------------------------------------------------------------------------- Employee retirement and severance benefits (a) $183.6 $183.6 $126.1 $57.5 Asset write-offs 106.5 106.5 106.5 --- Asset removal 39.5 39.5 3.0 36.5 Other 18.4 18.4 18.4 --- - ----------------------------------------------------------------------------------------- $241.5 $106.5 $348.0 $254.0 $94.0 =========================================================================================
(a) Includes approximately $100 million of pension and post-retirement health care curtailment losses and special termination benefits recognized in the current year. Refer to Notes 8 and 9. The asset impairment losses of $73.8 million consist principally of the write-down of certain operating assets in North America and the Asia-Pacific region, and result from the evaluation of the Company's ability to recover asset costs given changes in local market conditions, sourcing of products, and other strategic factors. Operating profit for 1993 includes non-recurring charges of $64.3 million ($41.1 million after tax or $.18 per share) principally from the write-down of certain assets in Europe and North America. NOTE 5 SHAREHOLDERS' EQUITY Under plans authorized by the Board of Directors, the Company purchased 5,684,864 shares of its common stock in 1995, 6,194,500 shares in 1994, and 9,487,508 shares in 1993. All purchases are included in treasury stock. Net exchange gains or losses resulting from the translation of assets and liabilities of foreign subsidiaries, except those in highly inflationary economies, are accumulated in the currency translation component of shareholders' equity. 23 10 Components of shareholders' equity were:
=================================================================================================================================== Minimum Common stock Capital in Treasury stock pension Currency ----------------- excess of Retained ----------------- liability translation (millions) shares amount par value earnings shares amount adjustment adjustment - ----------------------------------------------------------------------------------------------------------------------------------- Balance, January 1, 1993 310.2 $77.5 $69.2 $3,033.9 72.9 ($1,105.0) $ -- ($130.4) Stock options exercised .1 .1 2.8 Net earnings 680.7 Dividends (305.2) Exchange adjustments (36.8) Minimum pension liability adjustment (25.3) Common stock repurchases 9.5 (548.1) - ----------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1993 310.3 77.6 72.0 3,409.4 82.4 (1,653.1) (25.3) (167.2) Stock options exercised .1 2.3 Net earnings 705.4 Dividends (313.6) Exchange adjustments 7.9 Minimum pension liability adjustment 25.3 Common stock repurchases 6.2 (327.3) Other (5.7) .1 (.2) - ----------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1994 310.4 77.6 68.6 3,801.2 88.7 (1,980.6) -- (159.3) Stock options exercised .7 .2 36.6 Net earnings 490.3 Dividends (328.5) Exchange adjustments (34.6) Common stock repurchases 5.7 (374.7) Other -- (5.9) - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1995 311.1 $77.8 $105.2 $3,963.0 94.4 ($2,361.2) $ -- ($193.9) ===================================================================================================================================
NOTE 6 DEBT Notes payable consist principally of commercial paper borrowings in the United States at the highest credit rating available and, to a lesser extent, bank loans of foreign subsidiaries at competitive market rates. U.S. borrowings at December 31, 1995, were $173.4 million with an effective interest rate of 5.7% and at December 31, 1994, were $243.3 million with an effective interest rate of 5.9%. At December 31, 1995, the Company had $623.5 million of short-term lines of credit, of which $607.9 million were unused and available for borrowing on an unsecured basis. Long-term debt at year-end consisted of:
=========================================================== (millions) 1995 1994 - ----------------------------------------------------------- (a) Three-Year Notes due 1997 $200.0 $200.0 (b) Five-Year Notes due 1998 200.0 200.0 (c) Five-Year Notes due 1997 299.6 299.4 Other 20.1 20.7 - ----------------------------------------------------------- 719.7 720.1 Less current maturities (1.9) (.9) - ----------------------------------------------------------- Balance, December 31 $717.8 $719.2 ===========================================================
(a) In September 1994, the Company issued $200 million of three-year debt consisting of both 8.125% Euro Canadian Dollar Secured Notes and 5.25% Swiss Franc Secured Notes. These Notes were swapped into U.S. dollar obligations, with a variable rate indexed to the Federal Reserve AA composite rate on 30-day commercial paper, for the duration of the three-year term. (b) In October 1993, the Company issued $200 million of five-year 6.25% Euro Canadian Dollar Notes which were swapped into 4.629% fixed rate U.S. dollar obligations for the duration of the five-year term. In December 1993, the Notes were swapped into variable rate debt for a two-year period, indexed to the London Interbank Offered Rate. This swap expired in December 1995. (c) In July 1992, the Company issued $300 million of five-year 5.9% U.S. dollar obligations. The Notes were swapped into variable rate debt for a two-year period expiring July 1994, indexed to the London Interbank Offered Rate. In August 1993, the Company filed a $200 million "shelf registration" with the Securities and Exchange Commission which remains unused at December 31, 1995. Scheduled principal repayments on long-term debt are (in millions): 1996-$2, 1997-$502, 1998-$206, 1999-$1, 2000-$1. Interest paid, net of amounts capitalized, approximated interest expense in each of the three years ended December 31, 1995. Interest expense capitalized as part of the construction cost of fixed assets was (in millions): 1995-$7.2; 1994-$6.9; 1993-$7.1. NOTE 7 STOCK OPTIONS The Key Employee Long-Term Incentive Plan provides for benefits to be awarded to executive-level employees in the form of stock options, performance shares, performance units, incentive stock options, restricted stock grants, and other stock-based awards. The Kellogg Employee Stock Ownership Plan is designed to offer stock and other incentive awards based on Company performance to employees who are not eligible to participate in the Key Employee Long-Term Incentive Plan. Under these plans, options have been granted with exercise prices equal to the fair market value of the Company's common stock at the time of grant, exercisable for a 10-year period following the date of grant, subject to vesting rules. Options awarded to executive-level employees are vested at the date of grant, while options awarded to other employees are subject to graded vesting over a five-year period. The Key Employee Long-Term Incentive Plan also contains a reload option feature. When Company stock is surrendered to pay the exercise price of a stock option, the holder of the option is granted a new option for the number of shares surrendered. For all options reloaded, the expiration date is not changed, but the option price becomes the fair market value of the Company's stock on the date the new reload option is granted. Under the Key Employee Long-Term Incentive Plan, options for 9,949,433 and 8,905,323 shares were available for grant at January 1, 1995, and December 31, 1995, respectively. Under the Kellogg Employee Stock Ownership Plan, options for 5,228,710 and 4,616,160 shares were available for grant at January 1, 1995, and December 31, 1995, respectively. 24 11 Transactions under these plans were:
======================================================================================= 1995 1994 1993 - --------------------------------------------------------------------------------------- Under option, January 1 3,805,335 2,434,587 1,909,382 Granted 2,588,928 1,607,984 848,885 Exercised (1,915,322) (85,647) (293,494) Cancelled (56,183) (151,589) (30,186) - -------------------------------------------------------------------------------------- Under option, December 31 4,422,758 3,805,335 2,434,587 - -------------------------------------------------------------------------------------- Exercisable, December 31 3,052,873 3,034,195 2,434,587 - -------------------------------------------------------------------------------------- Shares available, December 31, for options that may be granted 13,521,483 15,178,143 10,620,578 - -------------------------------------------------------------------------------------- Average prices per share Exercised $54.61 $38.20 $45.46 Under option, December 31 $59.15 $56.03 $56.95 ======================================================================================
NOTE 8 PENSION BENEFITS The Company has a number of U.S. and worldwide pension plans to provide retirement benefits for its employees. Benefits for salaried employees are generally based on salary and years of service, while union employee benefits are generally a negotiated amount for each year of service. Plan funding strategies are influenced by tax regulations. Plan assets consist primarily of equity securities with smaller holdings of bonds, real estate, and other investments. Investment in Company common stock represented 8.9% and 7.7% of consolidated plan assets at December 31, 1995 and 1994, respectively. The components of pension expense were:
======================================================================================== (millions) 1995 1994 1993 - ---------------------------------------------------------------------------------------- Service cost $27.4 $29.0 $24.9 Interest cost 66.0 60.3 57.8 Actual (return) loss on plan assets (163.3) (3.5) (76.3) Net amortization and deferral 100.3 (51.0) 26.7 Curtailment loss and special termination benefits expense 77.7 - - - ---------------------------------------------------------------------------------------- Pension expense - Company plans 108.1 34.8 33.1 Pension expense - multiemployer plans 1.8 2.0 3.1 - ---------------------------------------------------------------------------------------- Total pension expense $109.9 $36.8 $36.2 ========================================================================================
The worldwide weighted average actuarial assumptions were:
========================================================================================= 1995 1994 1993 - ----------------------------------------------------------------------------------------- Discount rate 7.5% 8.3% 7.9% Long-term rate of compensation increase 5.1% 5.3% 5.4% Long-term rate of return on plan assets 9.6% 9.5% 9.5% =========================================================================================
Reconciliation of funded status of the plans at year-end was:
======================================================================================== UNDERFUNDED Overfunded (millions) 1995 1994 1995 1994 - ---------------------------------------------------------------------------------------- Accumulated benefit obligation: Nonvested $ 43.3 $ 5.6 $ 37.3 $ 51.7 Vested 228.9 35.0 562.9 592.4 - ---------------------------------------------------------------------------------------- Total 272.2 40.6 600.2 644.1 Projected salary increases 60.9 14.6 45.0 89.7 - ---------------------------------------------------------------------------------------- Projected benefit obligation 333.1 55.2 645.2 733.8 Plan assets at fair value 227.8 9.5 680.3 711.9 - ---------------------------------------------------------------------------------------- Assets (less) greater than projected benefit obligation (105.3) (45.7) 35.1 (21.9) Unrecognized net (gain) loss 46.0 7.7 22.8 83.3 Unrecognized transition amount (5.1) (2.5) 2.2 .4 Unrecognized prior service cost 11.8 4.9 38.5 56.3 Minimum liability adjustment (7.3) (1.9) - - - ---------------------------------------------------------------------------------------- Prepaid (accrued) pension ($59.9) ($37.5) $98.6 $118.1 ========================================================================================
Curtailment losses and special termination benefits expense recognized in 1995 relate to operational workforce reduction initiatives undertaken during the year and are recorded as a component of non-recurring charges. Refer to Note 4 for further explanation. The amount of intangible assets related to underfunded pension plans was $7.3 million and $1.9 million at year-end 1995 and 1994, respectively. All gains and losses, other than curtailment losses, are recognized over the average remaining service period of active employees. The Company and certain subsidiaries sponsor 401(k) or similar savings plans for active employees. Expense related to these plans was (in millions): 1995-$18; 1994-$16; 1993-$16. NOTE 9 NONPENSION POSTRETIREMENT BENEFITS The Company and its North American subsidiaries provide health care and certain other benefits to substantially all retired employees, their covered dependents, and beneficiaries. Generally, employees are eligible for these benefits when one of the following service/age requirements is met: 30 years and any age; 20 years and age 55; 5 years and age 62. Components of postretirement benefit expense were:
========================================================================================== (millions) 1995 1994 1993 - ------------------------------------------------------------------------------------------ Service cost $11.8 $13.3 $12.1 Interest cost 41.5 39.2 38.6 Net amortization and deferral (.6) 3.1 1.0 Curtailment loss 26.3 - - - ------------------------------------------------------------------------------------------ Postretirement benefit expense $79.0 $55.6 $51.7 ========================================================================================== Discount rate used for accumulated benefit obligation 7.25% 8.50% 7.75% ==========================================================================================
The assumed health care cost trend rate was 8.0% for 1995, decreasing gradually to 4.75% by the year 2003 and remaining at that level thereafter. These trend rates reflect the Company's prior experience and management's expectation that future rates will decline. Increasing the assumed health care cost trend rates by 1 percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1995, by $68.9 million and postretirement benefit expense for 1995 by $8.5 million. All gains and losses, other than curtailment losses, are recognized over the average remaining service period of active plan participants. Curtailment losses recognized in 1995 relate to operational workforce reduction initiatives undertaken during the year and are recorded as a component of non-recurring charges. Refer to Note 4 for further explanation. The Company's postretirement health care plans currently are not funded. The accrued postretirement benefit cost included in the balance sheet at year-end was:
================================================================================ (millions) 1995 1994 - -------------------------------------------------------------------------------- Accumulated benefit obligation: Retirees $270.2 $250.7 Active plan participants 300.9 254.5 - -------------------------------------------------------------------------------- 571.1 505.2 Unrecognized experience gain (loss) (14.2) 1.0 Unrecognized prior service adjustments 9.2 (.5) - -------------------------------------------------------------------------------- Accrued postretirement benefit cost $566.1 $505.7 ================================================================================
25 12 NOTE 10 INCOME TAXES Earnings before income taxes and the provision for U.S. federal, state, and foreign taxes on these earnings were:
================================================================================ (millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Earnings before income taxes: United States $463.1 $ 741.1 $ 703.3 Foreign 332.9 388.9 330.8 - -------------------------------------------------------------------------------- $796.0 $1,130.0 $1,034.1 ================================================================================ Income taxes: Currently payable: Federal $205.2 $ 207.4 $ 233.0 State 34.7 42.4 38.0 Foreign 144.5 150.3 104.7 - -------------------------------------------------------------------------------- 384.4 400.1 375.7 - -------------------------------------------------------------------------------- Deferred: Federal (81.0) 18.1 (19.4) State (10.7) .2 (2.2) Foreign 13.0 6.2 (.7) - -------------------------------------------------------------------------------- (78.7) 24.5 (22.3) - -------------------------------------------------------------------------------- Total income taxes $305.7 $ 424.6 $ 353.4 ================================================================================
The difference between the U.S. federal statutory tax rate and the Company's effective rate was:
================================================================================ 1995 1994 1993 - -------------------------------------------------------------------------------- U.S. statutory rate 35.0% 35.0% 35.0% Foreign rates varying from 35% .2 .2 (1.5) State income taxes, net of federal benefit 2.0 2.5 2.2 Net change in valuation allowance 1.9 .1 -- Other (.7) (.2) (1.5) - -------------------------------------------------------------------------------- Effective income tax rate 38.4% 37.6% 34.2% ================================================================================
The deferred tax assets and liabilities included in the balance sheet at year-end were:
================================================================================== Deferred Deferred tax assets tax liabilities (millions) 1995 1994 1995 1994 - ---------------------------------------------------------------------------------- Current: Promotion and advertising $ 43.3 $ 46.0 $ 6.3 $ 5.8 Wages and payroll taxes 24.9 14.4 Health and postretirement benefits 15.5 15.4 10.4 9.5 State taxes 9.8 8.4 Other 17.3 23.0 18.2 13.9 - ---------------------------------------------------------------------------------- 110.8 107.2 34.9 29.2 - ---------------------------------------------------------------------------------- Less valuation allowance (4.0) - ---------------------------------------------------------------------------------- 110.8 103.2 34.9 29.2 - ---------------------------------------------------------------------------------- Noncurrent: Depreciation and asset disposals 24.7 7.0 280.2 313.9 Postretirement benefits 196.3 174.9 6.7 25.2 Capitalized interest 3.1 3.5 32.8 32.7 State taxes 11.1 1.7 Other 13.2 13.8 9.9 8.2 - ---------------------------------------------------------------------------------- 248.4 200.9 329.6 380.0 - ---------------------------------------------------------------------------------- Less valuation allowance (32.7) (13.9) - ---------------------------------------------------------------------------------- 215.7 187.0 329.6 380.0 - ---------------------------------------------------------------------------------- Total deferred taxes $326.5 $290.2 $364.5 $409.2 ==================================================================================
The 1995 increase in valuation allowance on deferred tax assets and corresponding impact on the effective income tax rate, as presented above, primarily relate to asset impairment losses recorded as non-recurring charges (refer to Note 4) for which no tax benefit was currently provided, based on management's assessment of the likelihood of recovering such benefits in future years. At December 31, 1995, foreign subsidiary earnings of $1.21 billion were considered permanently invested in those businesses. Accordingly, U.S. income taxes have not been provided on these earnings. Foreign withholding taxes of approximately $74 million would be payable upon remittance of these earnings. Subject to certain limitations, the withholding taxes would then be available for use as credits against the U.S. tax liability. Cash paid for income taxes was (in millions): 1995-$404; 1994-$396; 1993-$425. NOTE 11 FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION The fair values of the Company's financial instruments are based on carrying value in the case of short-term items, quoted market prices for derivatives and investments, and, in the case of long-term debt, incremental borrowing rates currently available on loans with similar terms and maturities. The carrying amounts of the Company's cash, cash equivalents, receivables, notes payable, and long-term debt approximate fair value. The Company uses derivative financial instruments only for the purpose of hedging currency, price, and interest rate exposures which exist as a part of its ongoing business operations. The Company, as a matter of policy, does not engage in speculative transactions. The Company enters into forward contracts and options to hedge against the adverse impact of fluctuations in foreign currency-denominated receivables, payables, intercompany loans, and other commitments. Gains and losses on forward contracts and options are not significant and are recognized in the earnings statement in the same period as the hedged transaction. Gains and losses related to currency hedges of net investments in foreign subsidiaries are recorded in the cumulative translation adjustment component of shareholders' equity. Forward contracts and options generally have maturities of twelve months or less and are entered into with major international financial institutions. The notional amounts of open forward contracts and options were $131.1 million and $91.2 million at December 31, 1995 and 1994, respectively. The Company enters into currency and interest rate swaps in connection with certain debt issues (refer to Note 6 for a description of outstanding swaps). Currency swaps are used to convert foreign currency-denominated debt to U.S. dollars, thereby minimizing the risk of currency fluctuations in these debt issues. The Company enters into interest rate swaps to reduce borrowing costs and to achieve a desired proportion of variable versus fixed rate debt, based on current and projected market conditions. 26 13 Gains and losses from currency and interest rate swaps are not significant and are recognized over the life of the debt issue as a component of interest expense. The notional amounts of currency and interest rate swaps were $400 million and $600 million at December 31, 1995 and 1994, respectively. The Company also uses commodity futures and options to hedge raw material costs. Gains and losses realized upon sale or exchange of these contracts are not significant and are recognized in cost of goods sold. The Company is exposed to credit loss in the event of nonperformance by counterparties on foreign exchange forward contracts and options, and currency and interest rate swaps. This credit loss is limited to the cost of replacing these contracts at current market rates. Management believes that the probability of such loss is remote. Financial instruments which potentially subject the Company to concentrations of credit risk are primarily cash, cash equivalents, and accounts receivable. The Company places its investments in highly rated financial institutions and investment grade short-term debt instruments, and limits the amount of credit exposure to any one entity. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers, generally short payment terms, and their dispersion across geographic areas. NOTE 12 QUARTERLY FINANCIAL DATA (UNAUDITED)
==================================================================================== (millions, except per share data) Net sales Gross profit 1995 1994 1995 1994 - ------------------------------------------------------------------------------------ First $1,716.0 $1,611.2 $ 946.7 $ 879.2 Second 1,780.1 1,616.9 960.4 888.2 Third 1,844.7 1,741.9 1,009.1 985.7 Fourth 1,662.9 1,592.0 909.8 858.2 - ------------------------------------------------------------------------------------ $7,003.7 $6,562.0 $3,826.0 $3,611.3 ==================================================================================== Net earnings Earnings per share 1995 1994 1995 1994 - ------------------------------------------------------------------------------------ First $196.0 $183.9 $ .89 $.81 Second (a) 135.9 151.5 .62 .68 Third 230.0 216.7 1.05 .96 Fourth (a) (71.6) 153.3 (.33) .70 - ------------------------------------------------------------------------------------ $490.3 $705.4 ====================================================================================
(a) Second quarter of 1995 includes non-recurring charges of $33.0 million after tax or $.15 per share. Fourth quarter of 1995 includes non-recurring charges of $238.3 million after tax or $1.10 per share. Refer to Note 4 for further explanation. The principal market for trading Kellogg shares is the New York Stock Exchange (NYSE). The shares are also traded on the Boston, Chicago, Cincinnati, Pacific, and Philadelphia Stock Exchanges. At year-end 1995, the closing price (on the NYSE) was $77.25 and there were 28,073 shareholders of record. Dividends paid per share of common stock increased 7% to $1.50 in 1995, marking the 39th consecutive year of increase. Management believes the trend of increased dividends will continue in 1996. Dividends paid and the quarterly price ranges on the NYSE during the last two years were:
========================================================== 1995 - QUARTER Dividend High Low Fourth $ .39 $79.50 $70.50 Third .39 73.63 66.75 Second .36 73.88 58.00 First .36 60.38 52.50 - ---------------------------------------------------------- $1.50 ========================================================== 1994 - Quarter - ---------------------------------------------------------- Fourth $ .36 $60.50 $56.38 Third .36 57.38 51.25 Second .34 56.38 47.75 First .34 58.00 48.25 - ---------------------------------------------------------- $1.40 ==========================================================
NOTE 13 OPERATING SEGMENTS The Company operates in a single industry - manufacturing and marketing grain-based convenience food products including ready-to-eat cereal, toaster pastries, frozen waffles, and cereal bars throughout the world. The following table describes operations by geographic area. Geographic operating profit includes allocated corporate overhead expenses. Corporate assets are comprised principally of cash and cash equivalents held for general corporate purposes.
(millions) ========================================================================================= % % % NET SALES 1995 CHANGE 1994 change 1993 change - ----------------------------------------------------------------------------------------- United States $4,080.3 + 6 $3,840.8 + 2 $3,783.9 + 6 % of total 58% 59% 60% Europe 1,829.1 + 9 1,683.7 + 9 1,545.8 - 8 % of total 26% 26% 25% Other areas 1,094.3 + 5 1,037.5 + 7 965.7 + 2 % of total 16% 15% 15% - ----------------------------------------------------------------------------------------- Consolidated $7,003.7 + 7 $6,562.0 + 4 $6,295.4 + 2 ========================================================================================= % % % OPERATING PROFIT (a) 1995 CHANGE 1994 change 1993 change - --------------------------------------------------------------------------------------------- United States $443.1 -37 $ 708.5 + 14 $ 621.6 + 3 % of total 53% 61% 62% Europe 293.6 + 2 287.5 + 24 231.0 -19 % of total 35% 25% 23% Other areas 100.8 -39 166.6 + 10 152.0 -13 % of total 12% 14% 15% - ------------------------------------------------------------------------------------------- Consolidated $837.5 -28 $1,162.6 + 16 $1,004.6 - 5 =========================================================================================== % % % IDENTIFIABLE ASSETS 1995 CHANGE 1994 change 1993 change - -------------------------------------------------------------------------------------------- United States $2,286.0 + 2 $2,242.0 - 4 $2,344.8 +14 % of total 52% 50% 55% Europe 1,269.4 - 1 1,282.5 + 21 1,060.0 - 6 % of total 29% 29% 25% Other areas 838.5 - 9 923.8 + 14 809.4 + 5 % of total 19% 21% 19% Corporate assets 20.7 + 9 19.0 - 17 22.9 -49 % of total -- -- 1% - ------------------------------------------------------------------------------------------- Consolidated $4,414.6 - 1 $4,467.3 + 5 $4,237.1 + 6 ===========================================================================================
(a) Operating profit for 1995 includes non-recurring charges of $421.8 million consisting of $325.0, $38.4, and $58.4 million for United States, Europe, and other areas, respectively. Operating profit for 1993 includes non-recurring changes of $64.3 million consisting of $36.4, $19.1, and $8.8 million for the United States, Europe, and other areas, respectively. Refer to Note 4. 27 14 NOTE 14 SUPPLEMENTAL FINANCIAL STATEMENT DATA (millions)
============================================================================================ STATEMENT OF EARNINGS 1995 1994 1993 - -------------------------------------------------------------------------------------------- Research and development expense $ 72.2 $ 71.7 $ 59.2 Advertising expense $891.5 $856.9 $772.4 ============================================================================================ ============================================================================================ STATEMENT OF CASH FLOWS 1995 1994 1993 - -------------------------------------------------------------------------------------------- Change in operating assets and liabilities: Accounts receivable ($25.6) ($27.7) ($17.7) Inventories 19.6 6.8 13.3 Other current assets (33.7) (5.4) (32.3) Accounts payable 36.3 25.7 (5.0) Accrued liabilities 54.1 57.4 (27.7) - -------------------------------------------------------------------------------------------- Total change in operating assets and liabilities $50.7 $56.8 ($69.4) ============================================================================================ =============================================================================== BALANCE SHEET 1995 1994 - ------------------------------------------------------------------------------- Raw materials and supplies $ 129.7 $ 141.7 Finished goods and materials in process 247.0 254.6 - ------------------------------------------------------------------------------- Total inventories 376.7 396.3 - ------------------------------------------------------------------------------- Deferred income taxes 91.2 79.4 Other current assets 148.9 127.0 - ------------------------------------------------------------------------------- Total other current assets 240.1 206.4 - ------------------------------------------------------------------------------- Land 50.0 47.3 Buildings 1,202.8 1,122.6 Machinery and equipment 3,283.0 3,141.0 Construction in progress 202.0 289.6 Accumulated depreciation (1,953.0) (1,707.7) - ------------------------------------------------------------------------------- Property, net 2,784.8 2,892.8 - ------------------------------------------------------------------------------- Accrued income taxes 64.2 72.0 Accrued salaries and wages 121.8 80.5 Accrued advertising and promotion 266.3 257.5 Other accrued liabilities 252.4 165.0 - ------------------------------------------------------------------------------- Total accrued liabilities 704.7 575.0 - ------------------------------------------------------------------------------- Nonpension postretirement benefits 546.1 486.8 Deferred income taxes 201.7 198.1 Other liabilities 92.7 70.5 - ------------------------------------------------------------------------------- Total other liabilities $ 840.5 $ 755.4 - ------------------------------------------------------------------------------- ===============================================================================
REPORT OF INDEPENDENT ACCOUNTANTS PRICE WATERHOUSE LLP To the Shareholders and Board of Directors of Kellogg Company In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of earnings and retained earnings and of cash flows present fairly, in all material respects, the financial position of Kellogg Company and its subsidiaries at December 31, 1995 and 1994, and the results of their operations and cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Battle Creek, Michigan February 2, 1996 28 EX-23.01 6 EXHIBIT 23.01 1 EXHIBIT 23.01 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (Nos. 33-20731, 33-38846 and 33-49875) and the Registration Statements on Form S-8 (Nos. 2-77316, 33-27293, 33-27294, 33-40651 and 33-53403) of Kellogg Company of our report dated February 2, 1996 appearing on page 28 of the Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page 11 of this Form 10-K. PRICE WATERHOUSE LLP Battle Creek, Michigan March 25, 1996 EX-23.02 7 EXHIBIT 23.02 1 EXHIBIT 23.02 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-27294) of Kellogg Company of our report dated March 8, 1996 which appears on page 1 of Exhibit 99.01 of this Form 10-K and to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-27293) of Kellogg Company of our report dated March 8, 1996 which appears on page 1 of Exhibit 99.02 of this Form 10-K. PRICE WATERHOUSE LLP Battle Creek, Michigan March 25, 1996 EX-24.01 8 EXHIBIT 24.01 1 EXHIBIT 24.01 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ C.X. Gonzalez ----------------------- Director Dated: January 19, 1996 ----------- 2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ Gordon Gund ----------------------- Director Dated: January 25, 1996 ----------- 3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ Ann McLaughlin ----------------------- Director Dated: January 30, 1996 ----------- 4 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ Russell G. Mawby ----------------------- Director Dated: January 24, 1996 ----------- 5 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ W. E. LaMothe ----------------------- Director Dated: January 18, 1996 ----------- 6 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ Dolores D. Wharton ----------------------- Director Dated: January 23, 1996 ----------- 7 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ T. P. Smucker ----------------------- Director Dated: January 25, 1996 ----------- 8 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ Harold A. Poling ----------------------- Director Dated: January 22, 1996 ----------- 9 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ J. R. Munro ----------------------- Director Dated: January 24, 1996 ----------- 10 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ A. G. Langbo ----------------------- Director Dated: January 18, 1996 ----------- 11 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ John L. Zabriskie ----------------------- Director Dated: January 25, 1996 ----------- 12 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ Donald Rumsfeld ----------------------- Director Dated: January 26, 1996 ----------- EX-27.01 9 EXHIBIT 27.01
5 This schedule contains summary financial information extracted from Kellogg Company and subsidiaries Consolidated financial statements for the year ended December 31, 1995 and is qualified in its entirety by reference to such Financial Statements. 1,000,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 222 0 596 (6) 377 1,429 4,738 (1,953) 4,415 1,265 718 0 0 78 1,513 4,415 7,004 7,004 3,178 3,178 2,966 1 63 796 306 490 0 0 0 490 2.24 2.24
EX-99.01 10 EXHIBIT 99.01 1 EXHIBIT 99.01 KELLOGG COMPANY AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION OCTOBER 31, 1995 2 FORM 11-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR FISCAL YEAR ENDED OCTOBER 31, 1995 COMMISSION FILE NUMBER 1-4171 KELLOGG COMPANY AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN (Full Title of the Plan) --------------- KELLOGG COMPANY (Name of Issuer) ONE KELLOGG SQUARE BATTLE CREEK, MICHIGAN 49016-3599 (Principal Executive Office) 3 KELLOGG COMPANY AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN Index to Financial Statements and Additional Information - -------------------------------------------------------------------------
PAGE REPORT OF INDEPENDENT ACCOUNTANTS 1 FINANCIAL STATEMENTS AS OF OCTOBER 31, 1995 AND 1994 AND FOR THE YEAR ENDED OCTOBER 31, 1995: Statement of assets available for benefits, with fund information 2-3 Statement of changes in assets available for benefits, with fund information 4 Notes to financial statements 5-9 ADDITIONAL INFORMATION: Item 27a - Schedule of assets held for investment purposes - October 31, 1995 10 Item 27b - Schedule of loans or fixed income obligations - October 31, 1995 11-13 Item 27d - Schedule of reportable transactions - year ended October 31, 1995 14
4 REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees and Participants of the Kellogg Company American Federation of Grain Millers Savings and Investment Plan In our opinion, the accompanying statements of assets available for benefits and the related statement of changes in assets available for benefits present fairly, in all material respects, the assets available for benefits of the Kellogg Company American Federation of Grain Millers Savings and Investment Plan at October 31, 1995 and 1994, and the changes in assets available for benefits for the year ended October 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information included on pages 10 - 14 is presented for purposes of additional analysis and is not a required part of the basic financial statements but is additional information required by ERISA. The fund information in the statements of assets available for benefits and the statement of changes in assets available for benefits is presented for purposes of additional analysis rather than to present the assets available for plan benefits and changes in assets available for benefits of each fund. The additional information and the fund information have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. PRICE WATERHOUSE LLP Battle Creek, Michigan March 8, 1996 5 KELLOGG COMPANY AMERICAN FEDERATION OF GRAIN MILLERS 2 SAVINGS AND INVESTMENT PLAN STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION OCTOBER 31, 1995
- --------------------------------------------------------------------------------------------------------------------------- FIXED LOAN BOND INCOME TOTAL FUND FUND FUND Receivables: Employer contributions $ 484,554 $ - $ 6,010 $ 283,613 Interest 415 415 ---------------- ---------------- ---------------- ---------------- Total receivables 484,969 6,010 284,028 ---------------- ---------------- ---------------- ---------------- Investments: Plan's interest in Master Trust 123,586,199 4,876,840 Interfund borrowings (922,676) Guaranteed investment contracts 542,063,681 542,063,681 Loans to participants 14,631,203 14,631,203 TBC Pooled Funds Daily Liquidity 86,931 86,931 ---------------- ---------------- ---------------- ---------------- Total investments 680,368,014 14,631,203 4,876,840 541,227,936 ---------------- ---------------- ---------------- ---------------- Assets available for benefits $ 680,852,983 $ 14,631,203 $ 4,882,850 $ 541,511,964 ================ ================ ================ ================ COMPANY EQUITY STOCK FUND FUND Receivables: Employer contributions $ 34,636 $ 160,295 Interest ---------------- ---------------- Total receivables 34,636 160,295 ---------------- ---------------- Investments: Plan's interest in Master Trust 29,690,301 89,019,058 Interfund borrowings 922,676 Guaranteed investment contracts Loans to participants TBC Pooled Funds Daily Liquidity ---------------- ---------------- Total investments 30,612,977 89,019,058 ---------------- --------------- Assets available for benefits $ 30,647,613 $ 89,179,353 ================ ===============
See accompanying notes to financial statements 6 KELLOGG COMPANY AMERICAN FEDERATION OF GRAIN MILLERS 3 SAVINGS AND INVESTMENT PLAN STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION OCTOBER 31, 1994
- -------------------------------------------------------------------------------------------------------------------------- FIXED LOAN BOND INCOME TOTAL FUND FUND FUND ASSETS: Receivables: Employer contributions $ 515,950 $ - $ 6,500 $ 298,270 Interest 133,139 133,139 ---------------- ---------------- ---------------- ---------------- Total receivables 649,089 6,500 431,409 ---------------- ---------------- ---------------- ---------------- Investments Plan's interest in Master Trust 134,687,224 4,124,385 3,207,217 Guaranteed investment contracts 478,739,579 478,739,579 TBC Pooled Funds Daily Liquidity 1,199 1,199 Loans to participants 10,562,350 10,562,350 ---------------- ---------------- ---------------- ---------------- Total investments 623,990,352 10,562,350 4,124,385 481,947,995 ---------------- ---------------- ---------------- ---------------- Assets available for benefits $ 624,639,441 $ 10,562,350 $ 4,130,885 $ 482,379,404 ================ ================ ================ ================ COMPANY EQUITY STOCK FUND FUND ASSETS: Receivables: Employer contributions $ 28,161 $ 183,019 Interest ---------------- ---------------- Total receivables 28,161 183,019 ---------------- ---------------- Investments Plan's interest in Master Trust 21,108,072 106,247,550 Guaranteed investment contracts TBC Pooled Funds Daily Liquidity Loans to participants ---------------- ---------------- Total investments 21,108,072 106,247,550 ---------------- ---------------- Assets available for benefits $ 21,136,233 $ 106,430,569 ================ ================
See accompanying notes to financial statements 7 KELLOGG COMPANY AMERICAN FEDERATION OF GRAIN MILLERS 4 SAVINGS AND INVESTMENT PLAN STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION OCTOBER 31, 1995
- -------------------------------------------------------------------------------------------------------------------------- FIXED LOAN BOND INCOME TOTAL FUND FUND FUND Contributions: Employer $ 6,893,623 $ - $ 78,020 $ 4,219,403 Employee 16,817,030 199,446 11,635,400 Loans repaid (3,829,688) 89,769 2,382,599 Rollover from other qualified plans 5,102 1,425 ---------------- ---------------- ---------------- ---------------- Total contributions 23,715,755 (3,829,688) 367,235 18,238,827 ---------------- ----------------- ---------------- ---------------- Earnings on Investments: Plan's interest in income of Master Trust 27,550,917 631,411 284,531 Interest income 37,979,201 1,069,706 36,909,495 Investment services fees (61,871) (435) (49,178) Trustee fees (62,448) (320) (55,763) ---------------- ---------------- ---------------- ---------------- Total earnings on investments, net 65,405,799 1,069,706 630,656 37,089,085 ---------------- ---------------- ---------------- ---------------- Net transfers between funds 35,792 37,887,631 Participant withdrawals (32,892,681) (153,086) (214,006) (29,598,875) New loan distributions 6,981,921 (62,966) (4,476,880) Net transfers between Plans (15,331) (4,746) (7,228) ---------------- ---------------- ---------------- ---------------- Net increase (decrease) 56,213,542 4,068,853 751,965 59,132,560 ---------------- ---------------- ---------------- ---------------- Assets available for benefits at beginning of year 624,639,441 10,562,350 4,130,885 482,379,404 ---------------- ---------------- ---------------- ---------------- Assets available for benefits at end of year $ 680,852,983 $ 14,631,203 $ 4,882,850 $ 541,511,964 ================ ================ ================ ================ COMPANY EQUITY STOCK FUND FUND Contributions: Employer $ 400,769 $ 2,195,431 Employee 1,129,922 3,852,262 Loans repaid 328,542 1,028,778 Rollover from other qualified plans 3,677 ---------------- --------------- Total contributions 1,859,233 7,080,148 ---------------- ---------------- Earnings on Investments: Plan's interest in income of Master Trust 5,912,260 20,722,715 Interest income Investment services fees (2,195) (10,063) Trustee fees (1,775) (4,590) ---------------- --------------- Total earnings on investments, net 5,908,290 20,708,062 ---------------- --------------- Net transfers between funds 2,943,455 (40,866,878) Participant withdrawals (645,332) (2,281,382) New loan distributions (552,925) (1,889,150) Net transfers between Plans (1,341) (2,016) ---------------- --------------- Net increase (decrease) 9,511,380 (17,251, 216) ---------------- ---------------- Assets available for benefits at beginning of year 21,136,233 106,430,569 ---------------- ---------------- Assets available for benefits at end of year $ 30,647,613 $ 89,179,353 ================ ===============
See accompanying notes to financial statements 8 KELLOGG COMPANY 5 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The Kellogg Company American Federation of Grain Millers Savings and Investment Plan ("the Plan") operates as a qualified defined contribution plan and was established under Section 401(k) of the Internal Revenue Code. The accounts of the Plan are maintained on the accrual basis. Expenses of administration are paid by Kellogg Company. INVESTMENTS All investments are reported at current quoted market values except for guaranteed insurance contracts, which are reported at contract value and represent contributions made plus interest at the contract rate. The following investments exceeded five percent of the assets available for benefits at October 31, 1995 and 1994:
INTEREST OCTOBER 31, DESCRIPTION RATE 1995 1994 Brundage, Story & Rose Managed Synthetic GIC Fund Variable $ 52,042,315 $ 34,537,855 Putnam Horizon Managed Synthetic GIC Fund Variable 51,877,407 34,472,455 Morgan Bank GIC #41 9.37% 79,004,435 108,353,894 Allstate Life Ins. GAC #5686A 8.13% 42,826,850 - John Hancock GAC #5916-10000 8.30% - 59,553,995 John Hancock GAC #5916-10001 8.82% 99,791,611 91,720,860 John Hancock GAC #7605 7.87% 43,362,646 - Plan's Interest in Master Trust Variable 123,586,199 134,687,224
ALLOCATION OF NET INVESTMENT INCOME TO PARTICIPANTS Net investment income related to the respective investment options described in Note 2 is allocated monthly to participant accounts in proportion to their respective ownership at the beginning of the month. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires the Plan's management to make estimates and assumptions that affect the reported amounts of assets available for benefit at the date of the financial statements and changes in net assets available for benefits during the reporting period. Actual results could differ from those estimates. 9 KELLOGG COMPANY 6 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 2. PROVISIONS OF THE PLAN PLAN ADMINISTRATION The Plan is administered by trustees appointed by Kellogg and employees represented by the American Federation of Grain Millers. PLAN PARTICIPATION Generally, all Kellogg Company hourly employees belonging to American Federation of Grain Millers Union Local Nos. 3, 50, 211, 252, 374 and 401 are eligible to participate in the Plan. Subject to limitations prescribed by the Internal Revenue Service, participants may elect to contribute from 1 percent to 16 percent of their annual wages. Employee contributions not exceeding 5 percent of wages are matched by Kellogg Company at an 80 percent rate, with 12.5 percent of the Company match restricted for investment in the Kellogg Company stock fund. Employees may contribute to the Plan from their date of hire; however, the monthly contributions are not matched by the Company until the participant has completed one year of service. Participants of the Plan may elect to invest the contributions to their accounts as well as their account balances in an equity, bond, fixed income or Kellogg Company stock fund or a combination thereof in multiples of one percent. VESTING Participant account balances are fully vested. PARTICIPANT LOANS Effective September 1, 1994, participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their account balance. Loan transactions are treated as transfers between the Loan fund and the other funds. Loan terms range from 12 to 60 months. Interest is paid at a rate equal to one percent over the prime rate. Principal and interest are paid ratably through monthly payroll deductions. PARTICIPANT DISTRIBUTIONS Participants may elect to withdraw all or a portion of their contributions made after October 31, 1978, plus related net investment income. The withdrawal of any participant contributions which were not previously subject to income tax is restricted by Internal Revenue Service regulations. Under certain circumstances and subject to approval by the Trustees, participants may request withdrawal of a portion of Company contributions and their own contributions made prior to November 1, 1978, including net investment income thereon. 10 KELLOGG COMPANY 7 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 2. PROVISIONS OF THE PLAN (CONTINUED) Participants who terminate employment before retirement, by reasons other than death or disability, may remain in the Plan or receive payment of their account balances in a lump sum. If the account balance is less than $3,500 the terminated participant will receive the account balance in a lump sum. Participants are eligible to retire from the Company at age 62, upon reaching 55 with 20 years of service, or after 30 years of service. Upon retirement, disability, or death, a participant's account balance may be received in a lump sum or installment payments. 3. INCOME TAX STATUS The Plan administrator has received a favorable letter from the Internal Revenue Service regarding the Plan's qualification under applicable income tax regulations as an entity exempt from federal income taxes. 4. MASTER TRUST Assets of the Plan have been combined for investment purposes with assets of the Kellogg Company Salaried Savings and Investment Plan and Kellogg Company sponsored pension plans in a Master Trust. The Plan has an undivided interest in the assets held in the Master Trust in which interests are determined on the basis of cumulative funds specifically contributed on behalf of the Plan adjusted for an allocation of income. Such income allocation is based on the Plan's funds available for investment during the year. Master Trust assets held by the Plan and the Kellogg Company Salaried Savings and Investment Plan at October 31, 1995 and November 1, 1994 and the changes in assets for the period ended October 31, 1995 are as follows: 11 KELLOGG COMPANY AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6. MASTER TRUST (CONTINUED)
KELLOGG COMPANY SAVINGS AND INVESTMENT PLANS: FOR THE PLAN YEAR ENDED OCTOBER 31, 1995 SCHEDULE OF ASSETS AND LIABILITIES FOR MASTER TRUST INVESTMENT ACCOUNTS SHORT TERM BOND FUND FIXED INCOME FUND EQUITY FUND INVESTMENT ACCOUNT INVESTMENT ACCOUNT INVESTMENT ACCOUNT INVESTMENT ACCOUNT 10/31/94 10/31/95 10/31/94 10/31/95 10/31/94 10/31/95 10/31/94 10/31/95 ---------------------- ----------------------- ------------------- ----------------------- CASH/EQUIVALENTS: Non-Interest Bearing $2,615 $21,959 $0 $0 $0 $0 $0 $0 Interest Bearing Cash $0 $0 $149,329 $0 $0 $0 $0 $0 ---------------------- ----------------------- ------------------- ----------------------- TOTAL CASH/EQUIVAL $2,615 $21,959 $149,329 $0 $0 $0 $0 $0 ---------------------- ----------------------- ------------------- ----------------------- RECEIVABLES $6,610 $5,187 $355,046 $191,402 $9 $0 $221 $134 ---------------------- ----------------------- ------------------- ----------------------- GENERAL INVESTMENTS: Long Term U.S. Gov't Securities $0 $0 $6,909,396 $8,478,055 $0 $0 $0 $0 Short Term U.S. Gov't Securities $0 $0 $0 $470,954 $0 $0 $0 $0 Corporate Debt - Long Term $0 $0 $1,816,556 $2,148,889 $0 $0 $0 $0 Corporate Debt - Short Term $0 $0 $90,822 $225,136 $0 $0 $0 $0 Corporate Stocks - Common $0 $0 $0 $0 $0 $0 $52,686,114 $77,007,278 Value of Interest in Pooled Funds $1,343,305 $174,695 $279,481 $ 222,051 $2,014 $0 $49,776 $27,418 Guaranteed Investment Contracts $0 $0 $0 $0 $7,200,983 $0 $0 $0 ---------------------- ----------------------- ------------------- ----------------------- TOTAL INVESTMENTS $1,343,305 $174,695 $9,096,255 $11,545,085 $7,202,997 $0 $52,735,890 $77,034,696 ---------------------- ----------------------- ------------------- ----------------------- TOTAL ASSETS $1,352,530 $201,841 $9,600,630 $11,736,487 $7,203,006 $0 $52,736,111 $77,034,830 ---------------------- ----------------------- ------------------- ----------------------- PAYABLES $0 $0 $(105,531) $0 $0 $0 $0 $0 ---------------------- ----------------------- ------------------- ----------------------- TOTAL LIABILITIES $0 $0 $(105,531) $0 $0 $0 $0 $0 ---------------------- ----------------------- ------------------- ----------------------- NET ASSETS $1,352,530 $201,841 $9,495,099 $11,736,487 $7,203,006 $0 $52,736,111 $77,034,830 ====================== ======================= =================== ======================= COMPANY STOCK FUND INVESTMENT ACCOUNT ------------------------- 10/31/94 10/31/95 ------------------------- CASH/EQUIVALENTS: Non-Interest Bearing $0 $0 Interest Bearing Cash $0 $0 ------------------------- TOTAL CASH/EQUIVAL $0 $0 ------------------------- RECEIVABLES $4,188 $884 ------------------------- GENERAL INVESTMENTS: Long Term U.S. Gov't Securities $0 $0 Short Term U.S. Gov't Securities $0 $0 Corporate Debt - Long Term $0 $0 Corporate Debt - Short Term $0 $0 Corporate Stocks - Common $155,887,191 $132,601,292 Value of Interest in Pooled Funds $1,059,640 $20,895 Guaranteed Investment Contracts $0 $0 ------------------------- TOTAL INVESTMENTS $156,946,831 $132,622,187 ------------------------- TOTAL ASSETS $156,951,019 $132,623,071 ------------------------- PAYABLES $0 $0 ------------------------- TOTAL LIABILITIES $0 $0 ------------------------- NET ASSETS $156,951,019 $132,623,071 =========================
12 KELLOGG COMPANY AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6. MASTER TRUST (CONTINUED) KELLOGG COMPANY MASTER TRUST FOR THE PLAN YEARS ENDED OCTOBER 31, 1995 SCHEDULE OF INCOME AND EXPENSES, CHANGES IN NET ASSETS AND NET INCREASE (DECREASE) IN NET ASSETS OF MASTER TRUST INVESTMENT ACCOUNTS
SHORT TERM BOND FUND FIXED INCOME FUND EQUITY FUND COMPANY STOCK INVESTMENT ACCOUNT ADVISORY ACCOUNT ADVISORY ACCOUNT ADVISORY ACCOUNT ADVISORY ACCOUNT ------------------ ---------------- ----------------- ---------------- ---------------- Transfer of Assets Into Investment Account $239,061,840 $2,057,000 $0 $23,980,000 $5,275,000 Earnings on Investments Interest $85,839 $723,835 $494,662 $3,053 $34,566 Dividends $0 $0 $0 $0 $3,259,625 Net Realized Gain/(Loss) $0 ($120,303) $0 $2,686,388 $7,282,937 ------------------ ---------------- ----------------- ---------------- ---------------- TOTAL ADDITIONS $239,147,679 $2,660,532 $494,662 $26,669,441 $15,852,128 ------------------ ---------------- ----------------- ---------------- ---------------- Transfer of Assets Out of Investment Account ($240,298,368) ($1,290,000) ($7,697,668) ($15,005,000) ($60,926,196) Fees and Commissions $0 ($6,886) $0 ($25,499) $0 ------------------ ---------------- ----------------- ---------------- ---------------- TOTAL DISTRIBUTIONS ($240,298,368) ($1,296,886) ($7,697,668) ($15,030,499) ($60,926,196) ------------------ ---------------- ----------------- ---------------- ---------------- Change in Unrealized Appreciation $0 $877,742 $0 $12,659,777 $20,746,120 ------------------ ---------------- ----------------- ---------------- ---------------- NET CHANGE IN ASSETS ($1,150,689) $2,241,388 ($7,203,006) $24,298,719 ($24,327,948) ------------------ ---------------- ----------------- ---------------- ---------------- NET ASSETS AT 10/31/94 $1,352,530 $9,495,099 $7,203,006 $52,736,111 $156,951,019 ------------------ ---------------- ----------------- ---------------- ---------------- NET ASSETS AT 10/31/95 $201,841 $11,736,487 $0 $77,034,830 $132,623,071 ================== ================ ================= ================ ================
13 KELLOGG COMPANY 10 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES - OCTOBER 31, 1995 - -------------------------------------------------------------------------------
MARKET UNREALIZED SECURITY DESCRIPTION COST PRICE VALUE GAIN/LOSS TBC, Inc. Pooled Employee Funds Daily Liquidity Fund $ 86,931 1.000 $ 86,931 $ - Loans to participants 14,631,203 1.000 14,631,203 Brundage Story & Rose Managed Synthetic GIC Fund Variable Rate 52,042,315 1.000 52,042,315 Morgan Bank GIC #41 9.37% 6/1/96 79,004,435 1.000 79,004,435 John Hancock GAC #5916-10001 8.82% 6/1/97 99,791,611 1.000 99,791,611 Protective Life Ins. GIC #807-B 6.08% 1/31/97 29,005,356 1.000 29,005,356 Provident Life GIC #627-05439-01A 6.24% 6/30/97 16,700,317 1.000 16,700,317 Protective Life Ins. GIC #893-B 4.68% 6/1/96 14,648,382 1.000 14,648,382 Provident Life GIC #627-05439-02A 4.60% 6/3/96 14,493,110 1.000 14,493,110 Putnam Horizon Managed Synthetic GIC Variable Rate 6/1/99 51,877,407 1.000 51,877,407 Principal Mutual GAC #4-12130-01 5.30% 12/1/98 18,865,959 1.000 18,865,959 Peoples Security Ins #BDA00378FR 5.15% 12/1/97 18,450,962 1.000 18,450,962 Allstate Life Ins. GAC #5686A 8.13% 12/1/98 42,826,850 1.000 42,826,850 Commonwealth Life #ADA00687FR 7.54% 6/1/98 27,698,479 1.000 27,698,479 John Hancock GAC #7605 7.87% 12/1/98 43,362,646 1.000 43,362,646 Commonwealth Life GIC 6.19% 6/1/98 6,992,148 1.000 6,992,148 Metropolitan Life GIC 6.27% 6/1/99 17,648,727 1.000 17,648,727 New York Life GIC 6.20% 6/1/98 8,654,977 1.000 8,654,977 ----------------- ----------------- ------- $ 556,781,815 $ 556,781,815 $ - ================= ================= =======
14 KELLOGG COMPANY 11 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1995 - -------------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID IDENTITY AND ADDRESS AMOUNT --------------------- BALANCE AT OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END Otis J. Akins, Jr. $ 3,640 $ 128 $ 75 $ 3,512 8261 Manor Detroit, MI 48204 Paulettte P. Archie 18,891 1,207 623 17,428 480 Arcadia Blvd. Battle Creek, MI 49017 Eric G. Ivany, Jr. 7,600 341 202 7,195 21972 Bedford Rd. Battle Creek, MI 49017 Robert C. Putnam 30,000 819 542 29,181 3331 Putnam Ct. Battle Creek, MI 49017 Guadalupe G. Buentello 8,847 153 118 8,694 67225 M-66 Sturgis, MI 49091 Mary L. Kerr 3,000 123 43 2,877 300 Morgan Rd., Lot 8 Battle Creek, MI 49017 IDENTITY AND ADDRESS TERMS AMOUNT OVERDUE OF OBLIGOR --------------------------------------- ----------------------- LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Otis J. Akins, Jr. 09/30/94 8.8% 09/30/98 $ 3,512 $ 26 8261 Manor Detroit, MI 48204 Paulettte P. Archie 08/31/94 8.3% 08/31/99 17,428 599 480 Arcadia Blvd. Battle Creek, MI 49017 Eric G. Ivany, Jr. 08/31/94 8.3% 08/31/99 7,195 297 21972 Bedford Rd. Battle Creek, MI 49017 Robert C. Putnam 08/31/94 8.3% 08/31/99 29,181 1,003 3331 Putnam Ct. Battle Creek, MI 49017 Guadalupe G. Buentello 08/31/94 8.3% 08/31/99 8,694 479 67225 M-66 Sturgis, MI 49091 Mary L. Kerr 09/30/94 8.8% 09/30/97 2,877 189 300 Morgan Rd., Lot 8 Battle Creek, MI 49017
15 KELLOGG COMPANY 12 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1995 - -------------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID IDENTITY AND ADDRESS AMOUNT ---------------------- BALANCE AT OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END Victory Chaney $ 4,500 $ 242 $ 90 $ 4,179 407 Edgmont Dr. Willow Street, PA 17584 Michael R. Laprairie 9,000 1,004 465 7,920 2649 E. State Rd. Hastings, MI 49058 Joseph A. Varga 30,000 1,210 647 28,790 4411 Altahesa Blvd. Forth Worth, TX 76133 Milo E. Gilbert 4,000 2,815 147 864 122 N. 21st St. Battle Creek, MI 49015 Anthony L. Rogers 12,000 - - 12,000 30 Sherman Rd. Battle Creek, MI 49017 Jack L. Sheppard 15,000 2,063 650 12,569 56 W. Glenurban Battle Creek, MI 49017 TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS ---------------------------------------- --------------------- OF OBLIGOR LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Victory Chaney 08/31/94 8.3% 08/31/98 $ 4,179 $ 144 407 Edgmont Dr. Willow Street, PA 17584 Michael R. Laprairie 08/31/94 8.3% 08/31/99 7,920 164 2649 E. State Rd. Hastings, MI 49058 Joseph A. Varga 09/30/94 8.8% 09/30/99 28,790 1,050 4411 Altahesa Blvd. Forth Worth, TX 76133 Milo E. Gilbert 08/31/94 8.3% 08/31/95 864 12 122 N. 21st St. Battle Creek, MI 49015 Anthony L. Rogers 08/31/94 8.3% 08/31/99 - 1,155 30 Sherman Rd. Battle Creek, MI 49017 Jack L. Sheppard 08/31/94 8.3% 08/31/97 12,569 432 56 W. Glenurban Battle Creek, MI 49017
16 KELLOGG COMPANY 13 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1995 - -------------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGIANL YEAR UNPAID IDENTITY AND ADDRESS AMOUNT ---------------------- BALANCE AT OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END Martha N. Rideout $ 10,000 $ 129 $ 83 $ 9,871 2025 - 88th Ave. Oakland, CA 94621 Arty D. Barron 4,000 595 206 3,405 5044 Hickory Bark Dr. Memphis, TN 38141 TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS ---------------------------------------- --------------------- OF OBLIGOR LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Martha N. Rideout 04/30/95 10.0% 04/30/00 $ 9,871 $ 494 2025 - 88th Ave. Oakland, CA 94621 Arty D. Barron 12/31/94 9.5% 12/31/97 3,405 27 5044 Hickory Bark Dr. Memphis, TN 38141
17 KELLOGG COMPANY AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS - YEAR ENDED OCTOBER 31, 1995 (1) - --------------------------------------------------------------------------------
CURRENT VALUE AT TRANSACTION DATE COST OF NET NET NET SECURITIES REALIZED IDENTITY OF ISSUE PURCHASE PRICE SALES PRICE SOLD GAIN Allstate Life GIC # 5686-01 8.13% 12/1/98 $ 35,583,414 $ - $ - $ - Morgan Bank GIC #41 9.37% 6/1/96 38,773,699 38,773,699 John Hancock GIC #7605 7.87% 12/1/98 38,014,830 John Hancock GAC #5916-1000 8.30% 6/1/97 60,936,276 60,936,276
(1) Represents Plan's interest in a transaction (or a series of transactions of the same issue) in excess of five percent of the Plan's assets available at November 1, 1994. EX-99.02 11 EXHIBIT 99.02 1 EXHIBIT 99.02 KELLOGG COMPANY SALARIED SAVINGS AND INVESTMENT PLAN FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION OCTOBER 31, 1995 2 FORM 11-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR FISCAL YEAR ENDED OCTOBER 31, 1995 COMMISSION FILE NUMBER 1-4171 KELLOGG COMPANY SALARIED SAVINGS AND INVESTMENT PLAN (Full Title of the Plan) --------------- KELLOGG COMPANY (Name of Issuer) ONE KELLOGG SQUARE BATTLE CREEK, MICHIGAN 49016-3599 (Principal Executive Office) 3 KELLOGG COMPANY SALARIED SAVINGS AND INVESTMENT PLAN INDEX TO FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION - -------------------------------------------------------------------------------
Page REPORT OF INDEPENDENT ACCOUNTANTS 1 FINANCIAL STATEMENTS AS OF OCTOBER 31, 1995 AND 1994 AND FOR THE YEAR ENDED OCTOBER 31, 1995: Statement of assets available for benefits, with fund information 2-3 Statement of changes in assets available for benefits, with fund information 4 Notes to financial statements 5-9 ADDITIONAL INFORMATION: Item 27a - Schedule of assets held for investment purposes - October 31, 1995 10 Item 27b - Schedule of loans or fixed income obligations - October 31, 1995 11-13 Item 27d - Schedule of reportable transactions - year ended October 31, 1995 14
4 REPORT OF INDEPENDENT ACCOUNTANTS To the ERISA Finance Committee and Participants of the Kellogg Company Salaried Savings and Investment Plan In our opinion, the accompanying statements of assets available for benefits and the related statement of changes in assets available for benefits present fairly, in all material respects, the assets available for benefits of the Kellogg Company Salaried Savings and Investment Plan at October 31, 1995 and 1994, and the changes in assets available for benefits for the year ended October 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information included on pages 10 - 14 is presented for purposes of additional analysis and is not a required part of the basic financial statements but is additional information required by ERISA. The fund information in the statements of assets available for benefits and the statement of changes in assets available for benefits is presented for purposes of additional analysis rather than to present the assets available for plan benefits and changes in assets available for benefits of each fund. The additional information and the fund information have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. PRICE WATERHOUSE LLP Battle Creek, Michigan March 8, 1996 5 KELLOGG COMPANY SALARIED 2 SAVINGS AND INVESTMENT PLAN STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION OCTOBER 31, 1995 - -------------------------------------------------------------------------------
FIXED LOAN BOND INCOME TOTAL FUND FUND FUND ASSETS: Receivables: Employer contributions $ 390,747 $ - $ 14,036 $ 162,153 Employee contributions 742 742 Interest 329 329 ---------------- ---------------- ---------------- ---------------- Total receivables 391,818 14,036 163,224 ---------------- ---------------- ---------------- ---------------- Investments: Plan's interest in Master Trust 98,010,029 6,949,613 Interfund borrowings (1,056,536) Guaranteed investment contracts 288,935,607 288,935,607 Loans to participants 4,941,740 4,941,740 TBC Pooled Funds Daily Liquidity 67,912 4 67,908 ---------------- ---------------- ---------------- ---------------- Total investments 391,955,288 4,941,740 6,949,617 287,946,979 ---------------- ---------------- ---------------- ---------------- Assets available for benefits $ 392,347,106 $ 4,941,740 $ 6,963,653 $ 288,110,203 ================ ================ ================ ================ COMPANY EQUITY STOCK FUND FUND ASSETS: Receivables: Employer contributions $ 85,646 $ 128,912 Employee contributions Interest ---------------- ---------------- Total receivables 85,646 128,912 ---------------- ---------------- Investments: Plan's interest in Master Trust 47,787,040 43,273,376 Interfund borrowings 1,056,536 Guaranteed investment contracts Loans to participants TBC Pooled Funds Daily Liquidity ---------------- ---------------- Total investments 48,843,576 43,273,376 ---------------- --------------- Assets available for benefits $ 48,929,222 $ 43,402,288 ================ ===============
See accompanying notes to financial statements 6 KELLOGG COMPANY SALARIED 3 SAVINGS AND INVESTMENT PLAN STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION OCTOBER 31, 1994 - -------------------------------------------------------------------------------
FIXED LOAN BOND INCOME TOTAL FUND FUND FUND ASSETS: Receivables: Employer contributions $ 391,817 $ - $ 14,237 $ 162,273 Employee contributions 96 96 Interest 76,387 4 76,383 ---------------- ---------------- ---------------- ---------------- Total receivables 468,300 14,241 238,752 ---------------- ---------------- ---------------- ---------------- Investments: Plan's interest in Master Trust 93,050,541 5,359,818 3,778,593 Guaranteed investment contracts 255,403,672 255,403,672 Loans to participants 3,465,644 3,465,644 TBC Pooled Funds Daily Liquidity 14,702 14,702 ---------------- ---------------- ---------------- ---------------- Total investments 351,934,559 3,465,644 5,359,818 259,196,967 ---------------- ---------------- ---------------- ---------------- Assets available for benefits $ 352,402,859 $ 3,465,644 $ 5,374,059 $ 259,435,719 ================ ================ ================ ================ COMPANY EQUITY STOCK FUND FUND ASSETS: Receivables: Employer contributions $ 68,377 $ 146,930 Employee contributions Interest ---------------- ---------------- Total receivables 68,377 146,930 ---------------- ---------------- Investments: Plan's interest in Master Trust 33,849,932 50,062,198 Guaranteed investment contracts Loans to participants TBC Pooled Funds Daily Liquidity ---------------- ---------------- Total investments 33,849,932 50,062,198 ---------------- ---------------- Assets available for benefits $ 33,918,309 $ 50,209,128 ================ ================
See accompanying notes to financial statements 7 KELLOGG COMPANY SALARIED 4 SAVINGS AND INVESTMENT PLAN STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION OCTOBER 31, 1995 - -------------------------------------------------------------------------------
FIXED LOAN BOND INCOME TOTAL FUND FUND FUND Contributions: Employer $ 5,756,723 $ - $ 185,623 $ 2,661,762 Employee 12,875,500 511,775 6,221,383 Loans repaid (1,454,867) 49,013 704,899 Rollover from other qualified plans 215,449 22,100 46,348 ---------------- ---------------- ---------------- ---------------- Total contributions 18,847,672 (1,454,867) 768,511 9,634,392 ---------------- ----------------- ---------------- ---------------- Earnings on Investments: Plan's interest in income of Master Trust 21,150,938 844,826 264,568 Interest income 19,905,897 346,424 19,559,473 Trustee fees (35,227) (555) (26,319 Administrative fees (175,712) (2,459) (136,650 ---------------- ---------------- ----------------- ---------------- Total earnings on investments, net 40,845,896 346,424 841,812 19,661,072 ---------------- ---------------- ---------------- ---------------- Net transfers between funds 332,359 17,302,474 Participant withdrawals (19,764,652) (351,982) (299,382) (16,415,743 Loans to participants 2,936,521 (58,452) (1,514,939 Net transfers between Plans 15,331 4,746 7,228 ---------------- ---------------- ---------------- ---------------- Net increase (decrease) 39,944,247 1,476,096 1,589,594 28,674,484 Assets available for benefits at beginning of year 352,402,859 3,465,644 5,374,059 259,435,719 ---------------- ---------------- ---------------- ---------------- Assets available for benefits at end of year $ 392,347,106 $ 4,941,740 $ 6,963,653 $ 288,110,203 ================ ================ ================ ================ COMPANY EQUITY STOCK FUND FUND Contributions: Employer $ 1,036,407 $ 1,872,931 Employee 2,931,395 3,210,947 Loans repaid 261,588 439,367 Rollover from other qualified plans 99,941 47,060 ---------------- --------------- Total contributions 4,329,331 5,570,305 ---------------- ---------------- Earnings on Investments: Plan's interest in income of Master Trust 9,450,049 10,591,495 Interest income Trustee fees (3,482) (4,871) Administrative fees (16,188) (20,415) ---------------- ---------------- Total earnings on investments, net 9,430,379 10,566,209 ---------------- ---------------- Net transfers between funds 2,978,628 (20,613,461) Participant withdrawals (1,155,409) (1,542,136) Loans to participants (573,357) (789,773) Net transfers between Plans 1,341 2,016 ---------------- --------------- Net increase (decrease) 15,010,913 (6,806,840) Assets available for benefits at beginning of year 33,918,309 50,209,128 ---------------- --------------- Assets available for benefits at end of year $ 48,929,222 $ 43,402,288 ================ ===============
See accompanying notes to financial statements 8 KELLOGG COMPANY SALARIED 5 SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The Kellogg Company Salaried Savings and Investment Plan ("the Plan") operates as a qualified defined contribution plan and was established under Section 401(k) of the Internal Revenue Code. The accounts of the Plan are maintained on the accrual basis. Expenses of administration are paid by the Plan. INVESTMENTS All investments are reported at current quoted market values except for guaranteed insurance contracts, which are reported at contract value and represent contributions made plus interest at the contract rate. The following investments exceeded five percent of the assets available for benefits at October 31, 1995 and 1994:
INTEREST OCTOBER 31, DESCRIPTION RATE 1995 1994 Putnam Horizon Managed Synthetic GIC Fund Variable $ 28,395,496 $ - Brundage Story & Rose Managed Synthetic GIC Fund Variable 28,480,679 - Morgan Bank GIC #40 9.37% 34,922,275 47,895,595 John Hancock GAC #5917-10000 8.30% - 33,910,889 John Hancock GAC #5917-10001 8.82% 56,874,232 52,274,469 Protective Life Ins. GIC #807-A 6.08% 18,850,129 17,769,730 Allstate Life Ins. GAC #5686 8.13% 24,127,523 - John Hancosk GAC #7606 7.87% 23,463,837 - Plan's interest in Master Trust Variable 98,010,029 93,050,541
ALLOCATION OF NET INVESTMENT INCOME TO PARTICIPANTS Net investment income related to the respective investment options described in Note 2 is allocated monthly to participant accounts in proportion to their respective ownership at the beginning of the month. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires the Plan's management to make estimates and assumptions that affect the reported amounts of assets available for benefit at the date of the financial statements and changes in net assets available for benefits during the reporting period. Actual results could differ from those estimates. 9 KELLOGG COMPANY SALARIED 6 SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2. PROVISIONS OF THE PLAN PLAN ADMINISTRATION The Plan is administered by the ERISA Administrative Committee appointed by Kellogg Company. PLAN PARTICIPATION Generally, all salaried employees of Kellogg Company and its U.S. subsidiaries are eligible to participate in the Plan. Subject to limitations prescribed by the Internal Revenue Service, participants may elect to contribute from 1 percent to 16 percent of their annual wages. Employee contributions not exceeding 5 percent of wages are matched by Kellogg Company at an 80 percent rate, with 12.5 percent of the Company match restricted for investment in the Kellogg Company stock fund. Employees may contribute to the Plan from their date of hire; however, the monthly contributions are not matched by the Company until the participant has completed one year of service. Participants of the Plan may elect to invest the contributions as well as their account balances in an equity, bond, fixed income or Kellogg Company stock fund or a combination thereof in multiples of one percent. VESTING Participant account balances are fully vested. PARTICIPANT LOANS Effective September 1, 1994, participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their account balance. Loan transactions are treated as transfers between the Loan fund and the other funds. Loan terms range from 12 to 60 months. Interest is paid at a rate equal to one percent over the prime rate. Principal and interest are paid ratably through monthly payroll deductions. PARTICIPANT DISTRIBUTIONS Participants may elect to withdraw all or a portion of their contributions made after October 31, 1978, plus related net investment income. The withdrawal of any participant contributions which were not previously subject to income tax is restricted by Internal Revenue Service regulations. Under certain circumstances and subject to approval by the Trustees, participants may request withdrawal of a portion of Company contributions and their own contributions made prior to November 1, 1978, including net investment income thereon. Participants who terminate employment before retirement, by reasons other than death or disability, may remain in the Plan or receive payment of their account balances in a lump sum. If the account balance is less than $3,500 the terminated participant will receive the account balance in a lump sum. 10 KELLOGG COMPANY SALARIED 7 SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2. PROVISIONS OF THE PLAN (CONTINUED) Participants are eligible to retire from the Company at age 62, upon reaching 55 with 20 years of service, or after 30 years of service. Upon retirement, disability, or death, a participant's account balance may be received in a lump sum or installment payments. 3. INCOME TAX STATUS The Plan administrator has received a favorable letter from the Internal Revenue Service regarding the Plan's qualification under applicable income tax regulations as an entity exempt from federal income taxes. 4. MASTER TRUST Assets of the Plan have been combined for investment purposes with assets of the Kellogg Company American Federation of Grain Millers Savings and Investment Plan and Kellogg Company sponsored pension plans in a Master Trust. The Plan has an undivided interest in the assets held in the Master Trust in which interests are determined on the basis of cumulative funds specifically contributed on behalf of the Plan adjusted for an allocation of income. Such income allocation is based on the Plan's funds available for investment during the year. Master Trust assets held by the Plan and the Kellogg Company American Federation of Grain Millers Savings and Investment Plan at October 31, 1995 and November 1, 1994 and the changes in assets for the period ended October 31, 1995 are as follows: 11 KELLOGG COMPANY SALARIED SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6. MASTER TRUST (CONTINUED) KELLOGG COMPANY SAVINGS AND INVESTMENT PLANS: FOR THE PLAN YEAR ENDED OCTOBER 31, 1995 SCHEDULE OF ASSETS AND LIABILITIES FOR MASTER TRUST INVESTMENT ACCOUNTS
SHORT TERM BOND FUND FIXED INCOME FUND EQUITY FUND INVESTMENT ACCOUNT INVESTMENT ACCOUNT INVESTMENT ACCOUNT INVESTMENT ACCOUNT 10/31/94 10/31/95 10/31/94 10/31/95 10/31/94 10/31/95 10/31/94 10/31/95 --------------------- ---------------------- ------------------- ----------------------- CASH/EQUIVALENTS: Non-Interest Bearing $2,615 $21,959 $0 $0 $0 $0 $0 $0 Interest Bearing Cash $0 $0 $149,329 $0 $0 $0 $0 $0 --------------------- ---------------------- ------------------- ----------------------- TOTAL CASH/EQUIVALENTS $2,615 $21,959 $149,329 $0 $0 $0 $0 $0 --------------------- ---------------------- ------------------- ----------------------- RECEIVABLES $6,610 $5,187 $355,046 $191,402 $9 $0 $221 $134 --------------------- ---------------------- ------------------- ----------------------- GENERAL INVESTMENTS: Long Term U.S. Gov't Securities $0 $0 $6,909,396 $8,478,055 $0 $0 $0 $0 Short Term U.S. Gov't Securities $0 $0 $0 $470,954 $0 $0 $0 $0 Corporate Debt - Long Term $0 $0 $1,816,556 $2,148,889 $0 $0 $0 $0 Corporate Debt - Short Term $0 $0 $90,822 $225,136 $0 $0 $0 $0 Corporate Stocks - Common $0 $0 $0 $0 $0 $0 $52,686,114 $77,007,278 Value of Interest in Pooled Funds $1,343,305 $174,695 $279,481 $222,051 $2,014 $0 $49,776 $27,418 Guaranteed Investment Contracts $0 $0 $0 $0 $7,200,983 $0 $0 $0 --------------------- ---------------------- ------------------- ----------------------- TOTAL INVESTMENTS $1,343,305 $174,695 $9,096,255 $11,545,085 $7,202,997 $0 $52,735,890 $77,034,696 --------------------- ---------------------- ------------------- ----------------------- TOTAL ASSETS $1,352,530 $201,841 $9,600,630 $11,736,487 $7,203,006 $0 $52,736,111 $77,034,830 --------------------- ---------------------- ------------------- ----------------------- PAYABLES $0 $0 ($105,531) $0 $0 $0 $0 $0 --------------------- ---------------------- ------------------- ----------------------- TOTAL LIABILITIES $0 $0 ($105,531) $0 $0 $0 $0 $0 --------------------- ---------------------- ------------------- ----------------------- NET ASSETS $1,352,530 $201,841 $9,495,099 $11,736,487 $7,203,006 $0 $52,736,111 $77,034,830 ===================== ====================== =================== ======================= COMPANY STOCK FUND INVESTMENT ACCOUNT 10/31/94 10/31/95 --------------------------- CASH/EQUIVALENTS: Non-Interest Bearing $0 $0 Interest Bearing Cash $0 $0 --------------------------- TOTAL CASH/EQUIVALENTS $0 $0 --------------------------- RECEIVABLES $4,188 $884 --------------------------- GENERAL INVESTMENTS: Long Term U.S. Gov't Securities $0 $0 Short Term U.S. Gov't Securities $0 $0 Corporate Debt - Long Term $0 $0 Corporate Debt - Short Term $0 $0 Corporate Stocks - Common $155,887,191 $132,601,292 Value of Interest in Pooled Funds $1,059,640 $20,895 Guaranteed Investment Contracts $0 $0 --------------------------- TOTAL INVESTMENTS $156,946,831 $132,622,187 --------------------------- TOTAL ASSETS $156,951,019 $132,623,071 --------------------------- PAYABLES $0 $0 --------------------------- TOTAL LIABILITIES $0 $0 --------------------------- NET ASSETS $156,951,019 $132,623,071 ===========================
12 KELLOGG COMPANY SALARIED SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6. MASTER TRUST (CONTINUED) KELLOGG COMPANY MASTER TRUST FOR THE PLAN YEARS ENDED OCTOBER 31, 1995 SCHEDULE OF INCOME AND EXPENSES, CHANGES IN NET ASSETS AND NET INCREASE (DECREASE) IN NET ASSETS OF MASTER TRUST INVESTMENT ACCOUNTS
SHORT TERM BOND FUND FIXED INCOME FUND EQUITY FUND COMPANY STOCK INVESTMENT ADVISORY ADVISORY ADVISORY ADVISORY ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ------------- ---------- ----------------- ---------- ------------- Transfer of Assets Into Investment Account $239,061,840 $2,057,000 $0 $23,980,000 $5,275,000 Earnings on Investments Interest $85,839 $723,835 $494,662 $3,053 $34,566 Dividends $0 $0 $0 $0 $3,259,625 Net Realized Gain/(Loss) $0 ($120,303) $0 $2,686,388 $7,282,937 ------------- ----------- ----------- ------------ ------------ TOTAL ADDITIONS $239,147,679 $2,660,532 $494,662 $26,669,441 $15,852,128 ------------- ----------- ----------- ------------ ------------ Transfer of Assets Out of Investment Account ($240,298,368) ($1,290,000) ($7,697,668) ($15,005,000) ($60,926,196) Fees and Commissions $0 ($6,886) $0 ($25,499) $0 ------------- ----------- ----------- ------------ ------------ TOTAL DISTRIBUTIONS ($240,298,368) ($1,296,886) ($7,697,668) ($15,030,499) ($60,926,196) ------------- ----------- ----------- ------------ ------------ Change in Unrealized Appreciation $0 $877,742 $0 $12,659,777 $20,746,120 ------------- ----------- ----------- ------------ ------------ NET CHANGE IN ASSETS ($1,150,689) $2,241,388 ($7,203,006) $24,298,719 ($24,327,948) ------------- ----------- ----------- ------------ ------------ NET ASSETS AT 10/31/94 $1,352,530 $9,495,099 $7,203,006 $52,736,111 $156,951,019 ------------- ----------- ----------- ------------ ------------ NET ASSETS AT 10/31/95 $201,841 $11,736,487 $0 $77,034,830 $132,623,071 ============= =========== =========== ============ ============
13 KELLOGG COMPANY SALARIED 10 SAVINGS AND INVESTMENT PLAN ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES - OCTOBER 31, 1995 - -------------------------------------------------------------------------------
MARKET UNREALIZED SECURITY DESCRIPTION COST PRICE VALUE GAIN/LOSS TBC, Inc. Pooled Employee Funds Daily Liquidity Fund $ 67,912 1.000 $ 67,912 $ - Loans to participants 4,941,740 1.000 4,941,740 Brundage Story & Rose Managed Synthetic GIC Fund Variable Rate 28,480,679 1.000 28,480,679 Morgan Bank GIC #40 9.37% 6/1/96 34,922,275 1.000 34,922,275 John Hancock GAC #5917-10001 8.82% 6/1/97 56,874,232 1.000 56,874,232 Protective Life Ins. GIC #807-A 6.08% 1/31/97 18,850,129 1.000 18,850,129 Provident Life GAC #627-05437-01A 6.24% 6/30/97 14,071,168 1.000 14,071,168 Protective Life Ins. GIC #893-A 4.86% 6/1/96 7,784,527 1.000 7,784,527 Provident Life GAC #627-05437-02A 4.60% 6/3/96 7,797,998 1.000 7,797,998 Principal Mutual GAC #4-11730-01 5.30% 12/1/98 8,264,184 1.000 8,264,184 Putnam Horizon Managed Synthetic GIC Variable Rate 6/1/99 28,395,496 1.000 28,395,496 Peoples Security Ins Co #BDA00379FR 5.15% 12/1/97 8,615,377 1.000 8,615,377 Allstate Life Insurance GAC #5686 8.13% 12/1/98 24,127,523 1.000 24,127,523 Commonwealth Life #ADA00668FR 7.64% 6/1/98 15,409,517 1.000 15,409,517 John Hancock GAC #7606 7.87% 12/1/98 23,463,837 1.000 23,463,837 Commonwealth Life GIC 6.19% 6/1/98 2,494,523 1.000 2,494,523 Metropolitan Life GIC 6.27% 6/1/99 6,296,498 1.000 6,296,498 New York Life GIC 6.20% 6/1/98 3,087,644 1.000 3,087,644 ----------------- ----------------- --------- $ 293,945,259 $ 293,945,259 $ - ================= ================= =========
14 KELLOGG COMPANY SALARIED 11 SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1995 - --------------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID IDENTITY AND ADDRESS AMOUNT ---------------------- BALANCE AT OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END James F. Fabry $ 35,000 $ - $ - $ 34,884 3262 South Tulare Circle Denver, CO 80231 David J. Hambright 4,800 64 35 4,736 2061 Blair Street Williamsport, PA 17701 Eugene Carter 10,000 1,457 506 8,367 75 Candle Light Ln. S.W. Atlanta, GA 30331 Ashley J. Oudekerk 1,652 181 92 1,471 1291 Springmont Court Lawrenceville, GA 30243 Kathryn M. Calhoun 50,000 2,056 1,003 47,268 2247 Saluda Lane Acworth, GA 30101 Ernest E. Rice 40,000 4,947 2,483 35,053 3171 Harrison Road East Leroy, MI 49051 TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS ---------------------------------------- --------------------- OF OBLIGOR LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST James F. Fabry 08/31/94 8.3% 08/31/99 $ 34,884 $ 2,159 3262 South Tulare Circle Denver, CO 80231 David J. Hambright 10/31/94 8.8% 10/31/99 4,736 311 2061 Blair Street Williamsport, PA 17701 Eugene Carter 08/31/94 8.3% 08/31/98 8,367 115 75 Candle Light Ln. S.W. Atlanta, GA 30331 Ashley J. Oudekerk 10/31/94 8.8% 10/31/99 1,471 - 1291 Springmont Court Lawrenceville, GA 30243 Kathryn M. Calhoun 08/31/94 8.3% 08/31/99 47,268 1,625 2247 Saluda Lane Acworth, GA 30101 Ernest E. Rice 09/30/94 8.8% 09/30/99 35,053 767 3171 Harrison Road East Leroy, MI 49051
15 KELLOGG COMPANY SALARIED 12 SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1995 - --------------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID IDENTITY AND ADDRESS AMOUNT ---------------------- BALANCE AT OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END Lynn M. Hagelshaw $ 33,000 $ 3,682 $ 1,703 $ 28,872 1410 Eight Mile Road Union City, MI 49094 David A. Brewer 15,000 1,378 634 13,622 294 Battle Creek Avenue Battle Creek, MI 49015 Charlie H. Lake 50,000 5,476 2,875 44,524 1013 Northway Drive Charlotte, MI 48813 Brenda Christopher 2,400 369 72 2,031 130 Cheever Dracut, MA 01826 Richard L. Kilgore 7,000 483 231 6,422 67841 N. Big Hill Rd. Sturgis, MI 49091 Edward L. Johnson 37,281 2,678 980 33,944 891 N. Washington Battle Creek, MI 49017 Pamela S. Wilcox 20,000 519 331 19,481 194 Eldred Street Battle Creek, MI 49015 TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS ---------------------------------------- --------------------- OF OBLIGOR LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Lynn M. Hagelshaw 08/31/94 8.3% 08/31/99 $ 28,872 $ 397 1410 Eight Mile Road Union City, MI 49094 David A. Brewer 09/30/94 8.8% 09/30/99 13,622 596 294 Battle Creek Avenue Battle Creek, MI 49015 Charlie H. Lake 09/30/94 8.8% 09/30/99 44,524 649 1013 Northway Drive Charlotte, MI 48813 Brenda Christopher 01/31/95 9.5% 01/31/97 2,031 - 130 Cheever Dracut, MA 01826 Richard L. Kilgore 08/31/94 8.3% 08/31/99 6,422 309 67841 N. Big Hill Rd. Sturgis, MI 49091 Edward L. Johnson 08/31/94 8.3% 08/31/98 33,944 1,167 891 N. Washington Battle Creek, MI 49017 Pamela S. Wilcox 03/31/95 10.0% 03/31/00 19,481 325 194 Eldred Street Battle Creek, MI 49015
16 KELLOGG COMPANY SALARIED SAVINGS AND INVESTMENT PLAN 13 ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1995 - --------------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID IDENTITY AND ADDRESS AMOUNT ---------------------- BALANCE AT OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END Rebecca A. Clark $ 12,000 $ 1,339 $ 619 $ 10,499 5267 Longmeadow Dr. Memphis, TN 38134 Dolores M. Smith 20,000 2,231 1,060 17,498 723 W. Service Dr. Coldwater, MS 38618 Jerry L. Warren 50,000 5,578 2,580 43,746 Route 5, Box 77 Council Bluffs, IA 51503 Dixie J. Coss 3,500 433 122 3,067 23233 Mulvaney Road Battle Creek, MI 49017 TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS ---------------------------------------- --------------------- OF OBLIGOR LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Rebecca A. Clark 08/31/94 8.3% 08/31/99 $ 10,499 $ 144 5267 Longmeadow Dr. Memphis, TN 38134 Dolores M. Smith 08/31/94 8.3% 08/31/99 17,498 241 723 W. Service Dr. Coldwater, MS 38618 Jerry L. Warren 08/31/94 8.3% 08/31/99 43,746 602 Route 5, Box 77 Council Bluffs, IA 51503 Dixie J. Coss 09/30/94 8.8% 09/30/97 3,067 112 23233 Mulvaney Road Battle Creek, MI 49017
17 KELLOGG COMPANY SALARIED 14 SAVINGS AND INVESTMENT PLAN ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS - YEAR ENDED OCTOBER 31, 1995 (1) - --------------------------------------------------------------------------------
CURRENT VALUE AT TRANSACTION DATE COST OF NET NET NET SECURITIES REALIZED IDENTITY OF ISSUE PURCHASE PRICE SALES PRICE SOLD GAIN Allstate Life GIC #5686-01 8.13% 12/1/98 $19,248,097 $ - $ - $ - John Hancock GAC 5917-10000 8.30% 6/1/95 34,697,979 34,697,979 John Hancock GIC #7606 7.87% 12/1/98 19,061,335
(1) Represents Plan's interest in a transaction (or a series of transactions of the same issue) in excess of five percent of the Plan's assets available at November 1, 1994. -----END PRIVACY-ENHANCED MESSAGE-----