-----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, OE1vVVJlS42gPZIxuGrScOOcPOvar7AkDJJ946dfROTXWVqtcB4pk4nKW+e9y1zA umHhKv0QMazt0qlpMEmpPQ== 0000950124-97-001847.txt : 19970328 0000950124-97-001847.hdr.sgml : 19970328 ACCESSION NUMBER: 0000950124-97-001847 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970327 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-04171 FILM NUMBER: 97565601 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-K405 1 FORM 10-K405 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, 1996 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. [X] 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 $7,657,691,738 as determined by the February 28, 1997 closing price of $68.50 for one share of common stock on the New York Stock Exchange. As of February 28, 1997, 208,986,548 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, 1996, are incorporated by reference into Part II and Part IV of this Report. Portions of the registrant's definitive Proxy Statement, dated March 13, 1997, for the Annual Meeting of Stockholders to be held April 25, 1997, 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 and distributes toaster pastries, frozen waffles, crispy marshmallow squares, and cereal bars. The Company also markets several other convenience food products in various locations throughout the world. On December 16, 1996, the Company acquired the Lender's(R) Bagels business from Kraft Foods, Inc. The purchase included three Lender's plants and is further described in the Company's Annual Report under the caption "Liquidity and capital resources" on Page 17 and in Note 2 to the Consolidated Financial Statements on Page 23. In 1996 the Company also purchased a convenience foods plant in Pikeville, Kentucky. 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 material costs. Refer to Note 11 to the Consolidated Financial Statements contained in the Company's Annual Report on Pages 26 and 27. 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 2 3 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) Two Scoops(R) Raisin Bran, Rice Krispies(R), Rice Krispies Treats(R), Smacks(R), Special K(R)and Kellogg's Honey Crunch Corn Flakes(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; Lender's(R) for Bagels; and Rice Krispies Treats(TM) for crispy marshmallow squares. 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(R) for Kellogg's Corn Flakes(R). The slogans "The Best To You Each Morning"(R), "The Original and Best", 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 generally 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 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 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 $84.3 million in 1996, $72.2 million in 1995, and $71.7 million in 1994. 3 4 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 currently in substantial compliance with all material environmental regulations affecting the Company and its properties. Employees. At December 31, 1996, the Company had 14,511 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 ended December 31, 1996, 1995, and 1994, and identifiable segment assets and corporate assets, consisting principally of cash and cash equivalents, at the related year-ends are presented in Note 13 to the Consolidated Financial Statements on Page 27 of the Company's Annual 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 totaling 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 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 expected to commence operation in 1997. The Company also purchased a cereal plant in Ecuador in early 1997. The Company is currently constructing the W.K. Kellogg Institute for Food and Nutrition Research, which is expected to open in late 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 February 28, 1997, 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..................59 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..................64 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.........................49 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. Jean-Louis Gourbin Executive Vice President, President -- Kellogg Asia-Pacific...................49 Mr. Gourbin joined Kellogg France in 1983. He was promoted to President and CEO -- Kellogg Canada Inc. in 1990. In 1995, he was named Managing Director -- Kellogg (Aust.) Pty. Ltd. Mr. Gourbin was appointed Executive Vice President and President, Kellogg Asia-Pacific in December 1996. Carlos M. Gutierrez Executive Vice President -- Business Development..............................43 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, and Executive Vice President -- Business Development in December 1996. Thomas A. Knowlton Executive Vice President, President -- Kellogg North America..................50 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.................53 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..........................59 Mr. Clark joined the Company as Senior Vice President, General Counsel and Secretary in 1989. Robert L. Creviston Senior Vice President -- Human Resources......................................55 Mr. Creviston joined the Company as Vice President -- Employee Relations in 1982. He was named Senior Vice President -- Human Resources in 1991. 5 6 John R. Hinton Senior Vice President -- Administration and Chief Financial Officer...........51 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. Jay W. Shreiner Senior Vice President and Chief Information Officer...........................47 Mr. Shreiner joined the Company as Assistant Treasurer in 1983. He was named Vice President -- Information Services in 1990 and Senior Vice President and Chief Information Officer in 1995. Joseph M. Stewart Senior Vice President -- Corporate Affairs....................................54 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..................52 Mr. Teale joined Kellogg Company of Great Britain Limited in 1966. He was named Vice President -- Cereal Manufacturing of the Company's U.S. Food Products Division in 1990 and Senior Vice President -- Worldwide Operations and Technology in 1994. Alan Taylor Vice President -- Corporate Controller........................................45 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 on page 27 of the Company's Annual Report 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 pages 14 and 15 of the Company's Annual Report. Such information should be read in conjunction with the Consolidated Financial Statements of the Company and Notes thereto included in Item 8 of this Report. 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 14 through 19 of the Company's Annual Report. 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. 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 Company's Annual Report. 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 -- Refer to the Company's Proxy Statement dated March 13, 1997, for the Annual Meeting of Stockholders to be held on April 25, 1997, under the caption "Election of Directors" on pages 3 through 7, which information is incorporated herein by reference. Executive Officers of the Registrant -- Refer to "Executive Officers of the Registrant" under Item 4A at pages 5 and 6 of this Report. ITEM 11. EXECUTIVE COMPENSATION Refer to the Company's Proxy Statement dated March 13, 1997, for the Annual Meeting of Stockholders to be held on April 25, 1997, under the captions "Executive Compensation" and "Selected Benefit Plans" at pages 10 through 12 and 12 through 13, which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Refer to the Company's Proxy Statement dated March 13, 1997, for the Annual Meeting of Stockholders to be held on April 25, 1997, under the caption "Security Ownership" at pages 2 through 3, which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Refer to the Company's Proxy Statement dated March 13, 1997, for the Annual Meeting of Stockholders to be held on April 25, 1997, under the captions "About The Board of Directors" at page 5, and "Stock Option Loans and Executive Officer Indebtedness" at page 13, 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 January 31, 1997, appearing on pages 20 through 28 of the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1996, are incorporated herein by reference: (A)1. CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statement of Earnings for the years ended December 31, 1996, 1995, and 1994. Consolidated Statement of Shareholders' Equity for the years ended December 31, 1996, 1995, and 1994. Consolidated Balance Sheet at December 31, 1996 and 1995. Consolidated Statement of Cash Flows for the years ended December 31, 1996, 1995, and 1994. 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
This Consolidated Financial Statement Schedule should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1996. 7 8 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, incorporated by reference to Exhibit 3.02 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission file number 1-4171. 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.* 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.*
8 9
EXHIBIT NO. DESCRIPTION - ----------- ----------- 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, incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission file number 1-4171.* 10.11 Stock Compensation Program for Non-Employee Directors of Kellogg Company, as amended.* 13.01 Pages 14 through 28 of the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1996. 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, 1996, 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, 1996. 99.02 Kellogg Company Salaried Savings and Investment Plan Annual Report on Form 11-K for the fiscal year ended October 31, 1996.
- ------------------------- * 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 On November 18, 1996 the Company filed a Form 8-K in connection with the purchase of the Lenders(R) Bagels business from Kraft Foods, Inc. 9 10 SCHEDULE II -- VALUATION RESERVE (in millions)
1996 1995 1994 ---- ---- ---- Balance at January 1........................................ $ 6.4 $ 6.2 $ 6.0 Addition charged to costs and expenses...................... 0.7 0.8 1.8 Doubtful accounts charged to reserves....................... (0.4) (0.5) (0.9) Currency translation adjustments............................ (0.1) (0.1) (0.7) ----- ----- ----- Balance at December 31...................................... $ 6.6 $ 6.4 $ 6.2 ===== ===== =====
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 January 31, 1997, appearing in the 1996 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 January 31, 1997 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 27th day of March 1997. 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 27, 1997 --------------------------------------------- Executive Officer; Director Arnold G. Langbo (Principal Executive Officer) /s/ JOHN R. HINTON Senior Vice President, Chief March 27, 1997 --------------------------------------------- Financial Officer (Principal John R. Hinton Financial Officer) /s/ ALAN TAYLOR Vice President and Corporate March 27, 1997 --------------------------------------------- Controller (Principal Officer) Alan Taylor 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 27, 1997 --------------------------------------- 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, incorporated by reference to Exhibit 3.02 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission file number 1-4171. IBRF 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
13 14 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 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, incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission file number 1-4171.* IBRF 10.11 Stock Compensation Program for Non-Employee Directors of Kellogg Company, as amended.* E 13.01 Pages 14 through 28 of the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1996. 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, 1996, 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, 1996. E 99.02 Kellogg Company Salaried Savings and Investment Plan Annual Report on Form 11-K for the fiscal year ended October 31, 1996. 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 19, 1996) 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 500,000,000 shares of common stock of the par value of $0.25 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 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. 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 EX-10.11 3 EXHIBIT 10.11 1 EXHIBIT 10.11 STOCK COMPENSATION PROGRAM FOR NON-EMPLOYEE DIRECTORS OF KELLOGG COMPANY (AS AMENDED) This is the Stock Compensation Program for Non-Employee Directors of Kellogg Company (the "Program"). 1. Purpose. The purpose of the Program is to attract and retain outstanding non-employee directors by enabling them to participate in the Company's growth through automatic, non-discretionary awards of shares of common stock of the Company. 2. Eligibility. Eligibility for participation in the Program is limited to persons then currently serving as directors of the Company who are not "employees" of the Company (or any of its subsidiaries) within the meaning of the Employee Retirement Income Security Act of 1974 or for federal income tax withholding purposes (the "Participants"). 3. Stock Available for the Program. Shares of stock available for issuance pursuant to the Program may be either authorized but unissued shares or shares which have been or may be reacquired by the Company including Treasury shares of the common stock of the Company, $0.25 par value (the "Stock"). An aggregate of 187,200 shares of the Stock shall be so available. No awards shall be made under the Program after 1999. 4. Awards of Restricted Stock. Awards of 500 shares of Stock shall be made to each Participant with at least one year of service as a member of the Board following each Annual Meeting of Stockholders. All such Stock shall be restricted, in that the Participants may not sell, transfer or otherwise encumber the shares and the shares will be placed in a trust and will not be available to a Participant until his or her service as a member of the Board of Directors is terminated. 5. Rights of Participants. The Company shall establish a bookkeeping account in the name of each Participant (the "Stock Account"). As of the date that shares are awarded to a Participant, the Participant's Stock Account shall be adjusted to reflect such shares and an aggregate number of shares credited to each Participant on such date shall be transferred by the Company to the Kellogg Company Grantor Trust for Non-Employee Directors. Except for the right to direct the Trustee as to the manner which the shares are to be voted, a Participant shall not have any rights with respect to any shares credited to the Participant's Stock Account and transferred to the Trust until the date the Participant ceases, for any reason, to serve as a director of the Company. 6. Changes in Capitalization or Organization. Nothing contained in this document shall alter or diminish in any way the right and authority of the Company to effect changes in its capital or organizational structure; provided, however, that the following procedures shall be recognized. 6.1. Stock Split, Stock Dividend, or Extraordinary Distribution. In the event the number of shares of common stock of the Company is increased at any time by a stock split, by declaration by the Board of Directors of the Company of a dividend payable only in shares of such stock, or by any other extraordinary distribution of shares, the number of shares granted pursuant to Article 4 above shall be proportionately adjusted. 6.2. Organizational Changes. In the event a merger, consolidation, reorganization, or other change in corporate structure materially changes the terms or value of the common stock of the Company, the number of shares granted pursuant to Article 4 above shall be adjusted in such manner as the Board of Directors in its sole discretion shall determine to be equitable and consistent with the purposes of the Program. Such determination shall be conclusive for all purposes with respect to the grant made in Article 4 above. 7. Listing, Registration, and Legal Compliance. Each award made pursuant to Article 4 above shall be subject to the requirement that if at any time counsel to the Company shall determine that the listing, registration or qualification thereof or of any shares of the stock subject thereto upon any securities exchange or under any foreign, federal or state securities or other law or regulation, or the consent or approval of any governmental body or the taking of any other action to comply with or otherwise with respect to any such law or regulation, is necessary or desirable as a condition to or in connection with such award or delivery of shares of the Stock thereunder, no such award may be made or implemented unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained free of any conditions not acceptable to the Company. The holder of any such award shall supply the Company with such certificates, representations and information as the Company shall request and shall otherwise cooperate with the Company in effecting or obtaining such listing, registration, qualification, consent, approval or other action. 8. Obligation to Reelect. Nothing in this Program shall be deemed to create any obligation on the part of the Board of Directors to nominate any director for reelection by the Company's shareholders. 9. Termination or Amendment of the Program. The Board of Directors reserves the right to terminate or amend the Program at any time; provided, however, that such action shall not adversely affect the rights of any Participant under its provisions with respect to awards of the Stock theretofore made, and provided further that such action shall not increase the amount of authorized and unissued shares of the Stock available for the Program as specified in Article 3 above or materially increase the benefits to Participants. 10. Effective Date. This Program shall become effective as of the date that it is ratified by the stockholders and no award made hereunder shall be effective unless the Program is so ratified. A-1 EX-13.01 4 EXHIBIT 13.01 1 Exhibit 13.01 MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS OVERVIEW Kellogg Company operates in a single industry - manufacturing and marketing grain-based convenience food products including ready-to-eat cereal, toaster pastries, frozen waffles, cereal bars, and bagels throughout the world. During 1996, the Company maintained its global market leadership position with a 40% annual share of worldwide cereal category volume; 34% in North America, 46% in Europe, 45% in Asia-Pacific, and 63% in Latin America. In North America, the Company continued to hold the number one market share position in the toaster pastry, cereal/granola bar, and frozen waffle categories. With the recent acquisition of the Lender's Bagels business, the Company has added to its product portfolio the largest U.S. manufacturer of pre-packaged bagels. [GRAPH] 1996 Global Market Share (volume) - The 1996 Global Market Share (volume) graph shows in pie chart form, the relative proportion of the Company's 1996 global market share volume compared to others as follows: Kellogg 40%, Other 60%. [END GRAPH] The Company's 1996 results were negatively impacted by competitive conditions in the U.S. ready-to-eat cereal market, in which significant price reductions were undertaken by all major competitors during the year. In an effort to improve the brand value proposition to the consumer, the Company implemented several pricing actions in 1996, most notably reductions announced June 10, 1996, averaging 19% on brands comprising approximately two-thirds of its U.S. cereal business. Following an integrated strategy, the Company combined its price reductions with reduced marketing expenditures, while competitors continued heavy deep-discount promotional spending during most of the year. As a result, the Company reported declines in ready-to-eat cereal volume, consolidated net sales, net earnings and earnings per share (excluding non-recurring charges and other unusual items) versus 1995. Despite the negative impact on profitability in the short term, management believes these pricing actions are a necessary part of a long-term strategy initiated in early 1994 to improve the Company's pricing and cost structure. This strategy includes pricing based on brand differentiation, elimination of inefficient price promotion spending, and reduction of operating costs through productivity and streamlining programs. Management continues to believe that execution of this long-term strategy has positioned both the Company and the ready-to-eat cereal category for profitable growth in future years. 14 2 SELECTED FINANCIAL DATA
(millions, except per share data and number of employees) (a)(b) Earnings (a) before Average Net % Operating % accounting % shares sales Growth profit Growth change Growth outstanding - -------------------------------------------------------------------------------------------------- 10-year compound growth rate 7% 4% 5% 1996 $6,676.6 (5)% $958.9 14 % $531.0 8% 212.4 1995 7,003.7 7 837.5 (28) 490.3 (30) 219.2 1994 6,562.0 4 1,162.6 16 705.4 4 224.2 1993 6,295.4 2 1,004.6 (5) 680.7 - 231.5 1992 6,190.6 7 1,062.8 3 682.8 13 238.9 1991 5,786.6 12 1,027.9 16 606.0 21 241.2 1990 5,181.4 11 886.0 21 502.8 19 241.6 1989 4,651.7 7 732.5 (8) 422.1 (12) 244.2 1988 4,348.8 15 794.1 15 480.4 21 246.4 1987 3,793.0 14 691.2 7 395.9 24 247.4 1986 3,340.7 14 647.4 16 318.9 13 247.0 ==================================================================================================
Per Common Share Data (c) ---------------------------------------- (a)(b) Net Cash Earnings (d) Net Cash provided by/ before Price/ Stock provided by (used in) Common accounting Cash earnings price operating financing stock change dividends ratio range activities activities repurchases - --------------------------------------------------------------------------------------------- 10-year compound growth rate 7% 12% 1996 $2.50 $1.62 26 $62 - 81 $711.5 $94.0 $535.7 1995 2.24 1.50 34 53 - 80 1,041.0 (759.2) 374.7 1994 3.15 1.40 18 48 - 61 966.8 (559.5) 327.3 1993 2.94 1.32 19 47 - 68 800.2 (464.2) 548.1 1992 2.86 1.20 23 54 - 75 741.9 (422.6) 224.1 1991 2.51 1.075 26 35 - 67 934.4 (537.7) 83.6 1990 2.08 0.96 18 29 - 39 819.2 (490.9) 86.9 1989 1.73 0.86 20 29 - 41 533.5 (143.2) 78.6 1988 1.95 0.76 16 25 - 34 492.3 52.1 33.6 1987 1.60 0.64 16 19 - 34 523.5 (130.5) 22.6 1986 1.29 0.51 20 17 - 29 542.7 (144.1) - =============================================================================================
Return on Return on Total average Shareholders' average Property, Capital assets assets equity equity net expenditures Depreciation - ------------------------------------------------------------------------------------------------------ 1996 $5,050.0 11 % $1,282.4 37 % $2,932.9 $307.3 $251.5 1995 4,414.6 11 1,590.9 29 2,784.8 315.7 258.8 1994 4,467.3 16 1,807.5 40 2,892.8 354.3 256.1 1993 4,237.1 16 1,713.4 37 2,768.4 449.7 265.2 1992 4,015.0 11 1,945.2 21 2,662.7 473.6 231.5 1991 3,925.8 16 2,159.8 30 2,646.5 333.5 222.8 1990 3,749.4 14 1,901.8 28 2,595.4 320.5 200.2 1989 3,390.4 14 1,634.4 30 2,406.3 508.7 167.6 1988 3,297.9 16 1,483.2 36 2,131.9 538.1 139.7 1987 2,680.9 17 1,211.4 38 1,738.8 478.4 113.1 1986 2,084.2 17 898.4 40 1,281.1 329.2 92.7 ======================================================================================================
(e) Pretax Debt to interest (f) Long-term market coverage Current Advertising R&D Number of debt capitalization (times) ratio expense expense employees - --------------------------------------------------------------------------------------------- 1996 $726.7 14 % 13 0.7 $778.9 $84.3 14,511 1995 717.8 5 12 1.1 891.5 72.2 14,487 1994 719.2 8 23 1.2 856.9 71.7 15,657 1993 521.6 7 27 1.0 772.4 59.2 16,151 1992 314.9 3 33 1.2 782.3 56.7 16,551 1991 15.2 3 17 0.9 708.3 34.7 17,017 1990 295.6 7 10 0.9 648.5 38.3 17,239 1989 371.4 10 10 0.9 611.4 42.9 17,268 1988 272.1 9 14 0.9 560.9 42.0 17,461 1987 290.4 7 14 0.9 486.9 40.0 17,762 1986 264.1 6 13 1.1 355.6 38.2 17,383 =============================================================================================
(a) Operating profit for 1996 includes non-recurring charges of $136.1 ($97.8 after tax or $.46 per share). Other expense for 1996 includes a charge of $35.0 ($22.3 after tax or $.11 per share) for a contribution to the Kellogg's Corporate Citizenship Fund. Operating profit for 1995 includes non-recurring charges of $421.8 ($271.3 after tax or $1.24 per share). Operating profit for 1993 includes non-recurring charges of $64.3 ($41.1 after tax or $.18 per share). Refer to Management's Discussion and Analysis on pages 14-19 and Notes 3 and 4 within the Notes to Consolidated Financial Statements for further explanation of non-recurring charges and other unusual items for years 1994 - 1996. (b) Earnings before accounting change exclude the effect of adopting the following Statements of Financial Accounting Standards (SFAS): in 1992 a charge of $251.6 ($1.05 per share) net of $144.6 of income tax benefit for the transition effect of SFAS #106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and in 1989 a gain of $48.1 ($.20 per share) for SFAS #96 "Accounting for Income Taxes." (c) All per share data retroactively restated to reflect a 2 for 1 stock split in 1991. (d) The price/earnings ratio was calculated based on year-end stock price divided by earnings before the accounting changes referred to in note (b). These earnings include the non-recurring charges and other unusual items referred to in note (a). Excluding the impact of these unusual items, the price/earnings ratio in 1996, 1995, and 1993 would have been 21, 22, and 19, respectively. (e) Debt to market capitalization was calculated based on year-end total debt balance divided by market capitalization. Market capitalization was calculated based on year-end stock price multiplied by the number of shares outstanding at year-end. (f) The number of employees for 1996 includes approximately 1,100 positions added as a result of the acquisition of Lender's Bagels and other businesses during the year. 15 3 1996 COMPARED TO 1995 Total volume was up 1% for 1996, led by strength in the Company's Asia-Pacific and Latin American ready-to-eat cereal shipments and low double-digit growth in other convenience foods volume. These volume gains offset softness in the Company's U.S. and United Kingdom ready-to-eat cereal markets. Significantly impacted by a U.S. ready-to-eat cereal volume decline of 4%, global cereal volume was down 1%. Net sales were down 5%, primarily reflecting the price reductions, ready-to-eat cereal volume loss, and unfavorable product mix and foreign currency movements. On a geographic basis, net sales versus the prior year were:
================================================================================ NET SALES BY GEOGRAPHIC AREA - 1996 VS. 1995 % CHANGE - -------------------------------------------------------------------------------- U.S. Europe All other Consolidated - -------------------------------------------------------------------------------- Business -7% -1% +8% -4% Foreign currency impact -- -3% -3% -1% - -------------------------------------------------------------------------------- Total change -7% -4% +5% -5% ================================================================================
The gross profit margin was 53.2%, down 1.4 percentage points from the prior year, reflecting the price reductions, partially offset by operational cost savings which resulted in an improvement over 1995 in the cost of goods sold per unit volume shipped. Selling and administrative expense as a percentage of net sales (SGA%) was 36.8%, essentially flat with the prior year. The SGA% was maintained at a constant level primarily through a reduction in advertising and promotional spending in the U.S. market, which offset the negative impact on this ratio of reduced prices versus last year. Operating profit included non-recurring charges primarily related to streamlining initiatives of $136.1 million for 1996 ($97.8 million after tax or $.46 per share) and $421.8 million for 1995 ($271.3 million after tax or $1.24 per share). (Refer to the section on non-recurring charges on pages 18 and 19 for further information.) 4 Excluding non-recurring charges, operating profit declined 13% to $1.09 billion, principally attributable to the decrease in net sales. Operating profit results on a geographic basis were:
================================================================================ OPERATING PROFIT BY GEOGRAPHIC AREA - 1996 VS. 1995 - -------------------------------------------------------------------------------- (millions) U.S. Europe All other Consolidated - -------------------------------------------------------------------------------- 1996 operating profit as reported $611.2 $204.4 $143.3 $958.9 Non-recurring charges 24.1 76.5 35.5 136.1 - -------------------------------------------------------------------------------- 1996 OPERATING PROFIT EXCLUDING NON-RECURRING CHARGES $635.3 $280.9 $178.8 $1,095.0 - -------------------------------------------------------------------------------- 1995 operating profit as reported $443.1 $293.6 $100.8 $837.5 Non-recurring charges 325.0 38.4 58.4 421.8 - -------------------------------------------------------------------------------- 1995 OPERATING PROFIT EXCLUDING NON-RECURRING CHARGES $768.1 $332.0 $159.2 $1,259.3 - -------------------------------------------------------------------------------- % change - 1996 vs. 1995 excluding non-recurring charges: Business -17% -11% +16% -11% Foreign currency impact -- -4% -4% -2% - -------------------------------------------------------------------------------- TOTAL CHANGE -17% -15% +12% -13% ================================================================================
Gross interest expense, prior to amounts capitalized, was $69.4 million, in line with the prior-year amount. Despite an increase in debt during the year, total interest expense was maintained at prior-year levels due to the favorable effect of lower rates on short-term borrowings. Other expense for 1996 included a charge of $35.0 million ($22.3 million after tax or $.11 per share), for a contribution to the Kellogg's Corporate Citizenship Fund, a private trust established for charitable donations. This contribution is expected to satisfy the charitable-giving plans of the trust through the year 2000. Excluding this 5 unusual item, other income, net, decreased $19.5 million to $1.6 million, primarily due to foreign currency losses in Latin American markets and lower interest income during 1996. Excluding the effect of non-recurring charges and other unusual items, the Company's 1996 effective income tax rate was 36.8%, down .7 percentage points from the prior year, primarily due to favorable audit settlements in foreign jurisdictions and country mix. The effective tax rate based on earnings as reported was 38.2%. Net earnings and earnings per share for 1996, as reported, increased 8% and 12%, respectively, from 1995. Excluding non-recurring charges and other unusual items, earnings per share were $3.07, down 12% or $.41, consisting of $.46 in business decline and $.05 in unfavorable foreign currency movements, mitigated by $.07 from common stock repurchases and $.03 from the lower effective tax rate. Excluding non-recurring charges and other unusual items, net earnings were $651.1 million, down 14%. Foreign currency movements negatively impacted net earnings by 3% in Europe, 4% in other non-U.S. areas, and 1% on a consolidated basis. 1995 COMPARED TO 1994 The Company's total 1995 volume was up 4% versus the prior year, driven by ready-to-eat cereal shipments in North American, Continental European, and Asia-Pacific markets, combined with low double-digit growth in the Company's other convenience foods volume. Latin America experienced slightly lower cereal shipments, primarily due to recessionary conditions in Mexico. Global ready-to-eat cereal volume increased 3%. Consolidated net sales increased 7%, principally from volume growth and product mix improvements. On a geographic basis, net sales versus the prior year were:
================================================================================ NET SALES BY GEOGRAPHIC AREA - 1995 VS. 1994 % CHANGE - -------------------------------------------------------------------------------- U.S. Europe All other Consolidated - -------------------------------------------------------------------------------- Business +6% +2% +18% +7% Foreign currency impact -- +7% -13% -- - -------------------------------------------------------------------------------- TOTAL CHANGE +6% +9% +5% +7% ================================================================================
16 6 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. Selling and administrative expense represented 36.6% of net sales, down .7 percentage points from the prior year. The decrease in SGA% reflected the Company's continuing emphasis on cost containment and carefully managed marketing spending. Operating profit, excluding non-recurring charges of $421.8 million, increased 8% to $1.26 billion. Operating profit results on a geographic basis were:
================================================================================ OPERATING PROFIT BY GEOGRAPHIC AREA - 1995 VS. 1994 - -------------------------------------------------------------------------------- (millions) U.S. Europe All other Consolidated - -------------------------------------------------------------------------------- 1995 OPERATING PROFIT EXCLUDING NON-RECURRING CHARGES (a) $768.1 $332.0 $159.2 $1,259.3 - -------------------------------------------------------------------------------- 1994 OPERATING PROFIT AS REPORTED $708.5 $287.5 $166.6 $1,162.6 - -------------------------------------------------------------------------------- % change - 1995 vs. 1994 excluding non-recurring charges: Business +8% +7% +18% +9% Foreign currency impact -- +8% -22% -1% - -------------------------------------------------------------------------------- TOTAL CHANGE +8% +15% -4% +8% ================================================================================
(a) Refer to operating profit table on page 16. Gross interest expense, prior to amounts capitalized, increased to $69.8 million, 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. Other income, net, 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 and expenses 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. 7 The Company's effective income tax rate for 1995, excluding the effect of non-recurring charges, was 37.5%, comparable to the 1994 rate of 37.6%. The effective income tax rate based on earnings as reported was 38.4%. Due primarily to the significant effect of non-recurring charges on 1995 results, net earnings and earnings per share, as reported, were down 30% and 29%, respectively, versus 1994. Excluding non-recurring charges and other unusual items, net earnings were $761.6 million, up 8%, and earnings per share were $3.48, up 10% or $.33, consisting of $.31 in business growth, $.05 in common stock repurchases, and $.01 in tax rate reduction, partially offset by $.04 in unfavorable foreign currency movements. 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 1%. LIQUIDITY AND CAPITAL RESOURCES The Company's financial condition remained strong during 1996. A 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. Net cash provided by operating activities during 1996 was $711.5 million, compared to $1.04 billion in 1995. Cash flow from operations was down from prior-year levels, due principally to decreased earnings, combined with increased employee severance payments and other cash expenditures related to the Company's ongoing productivity initiatives. (Refer to the section on non-recurring charges on pages 18 and 19 for further information.) Additionally, the Company contributed $81 million to a voluntary employee benefit association (VEBA) trust for the initial funding of its nonpension postretirement benefit obligations. The ratio of current assets to current liabilities was .7 as of December 31, 1996, down from 1.1 at December 31, 1995, primarily due to a reclassification of $500 million in long-term debt to current maturity status. Net cash used in investing activities was $786.8 million, principally comprised of $307.3 million in capital spending and $505.2 million for the purchase of the Lender's Bagels business and other acquisitions during the year. Net cash provided by financing activities was $94.0 million, related to issuances of debt to fund common stock repurchases and the acquisition of the Lender's Bagels business, reduced by actual repurchases and dividend payments. Dividends paid per share of common stock increased 8% to $1.62 in 1996. 8 On December 16, 1996, the Company purchased certain assets and liabilities of the Lender's Bagels business from Kraft Foods, Inc. for $466 million of cash, including related acquisition costs. The acquisition was accounted for as a purchase. Accordingly, the assets and liabilities of the acquired business are included in the consolidated balance sheet as of December 31, 1996. The results of Lender's operations from the date of the acquisition to December 31, 1996, were not significant. The acquisition was initially financed through commercial paper borrowings that were replaced on January 29, 1997, with $500 million of 7-year notes, at an effective interest rate of 6.354%. Accordingly, an equivalent amount of commercial paper borrowings were classified as long-term debt in the December 31, 1996, balance sheet. 17 9 The remainder of long-term debt outstanding at year-end 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. The $200 million of three-year notes and the $300 million of five-year notes will mature during the third quarter of 1997 and are classified in current maturities as of December 31, 1996. Management currently intends to replace these borrowings with new long-term debt issuances as of the maturity dates and, as of year-end 1996, had entered into $150 million notional amount of interest rate hedges to effectively fix the U.S. Treasury rate on which an equivalent amount of future issuances would be priced. Short-term debt outstanding at year-end consisted principally of U.S. commercial paper. The ratio of total debt to market capitalization at December 31, 1996, was 14%, up from 5% at December 31, 1995. Under existing plans authorized by the Company's Board of Directors, management spent $535.7 million during 1996 to repurchase 7.4 million shares of the Company's common stock at an average price of $73 per share. On December 6, 1996, the Company's Board of Directors authorized an additional repurchase amount of up to $400 million, bringing the open authorization to $415.1 million as of December 31, 1996. During 1996, the Company continued to enjoy the highest available credit ratings on both its long-term debt and commercial paper. In January 1997, both Standard & Poor's and Moody's lowered their ratings on the Company's senior notes from Aaa to Aa and Aa1, respectively, citing the expectation that debt will constitute a much larger component of the Company's capital structure in the future, as a result of large stock repurchases, acquisition of the Lender's business, and recent charges for streamlining initiatives. Both ratings agencies confirmed the Company's Prime-1 commercial paper rating. Despite the reduction, the Company's senior debt continues to carry one of the highest credit ratings in the food industry, and management believes that this change will have an insignificant impact on future borrowing costs. At December 31, 1996, 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 AND OTHER UNUSUAL ITEMS During 1995 and 1996, management commenced numerous productivity and operational streamlining initiatives around the world in an effort to optimize the Company's cost structure and move toward a global business model. The consolidation of functions and the rationalization of capacity resulted in significant non-recurring charges during 1995 and 1996 which are expected to be far outweighed by ongoing annual savings in future years. During 1995, the Company incurred pre-tax non-recurring charges of $348.0 million related to operational streamlining initiatives in the U.S., Australia, and Europe. The Company eliminated approximately 2,000 employee positions by the end of 1996, through a combination of voluntary early retirement incentives, voluntary and involuntary severance programs, and attrition. Associated with these 1995 initiatives, the Company incurred during 1996 an additional $22 million in costs related to workforce and production redeployment which were expensed as incurred throughout the year. At year-end 1995, the Company had $94 million of reserves for future cash outlays related to these programs, of which $23 million was reversed during 1996 due to lower than expected employee severance payments, asset removal costs, and other favorable factors. In 1996, the Company initiated a plan to better serve the Pan-European marketplace by consolidating and reorganizing certain aspects of its European operations, and took action to further streamline operations in the U.S. and other international locations. As a result, approximately 600 additional employee positions are expected to be eliminated by the end of 1997. Charges related to 1996 initiatives were $122.1 million, which, in combination with the aforementioned reversals of $23 million and redeployment expenditures of $22 million, resulted in net pre-tax non-recurring charges during 1996 of $121.1 million. The charges incurred in 1995 and 1996 were comprised principally of costs for employee retirement and severance benefits, training, and relocation; asset write-off and removal; production redeployment; and related management consulting. (Refer to Note 3 within the Notes to Consolidated Financial Statements for further analysis of the charges and reserve utilization.) From all of the streamlining initiatives currently under way, the Company incurred pre-tax cash outlays of approximately $120 million in 1996 and expects to incur $50 million in 1997. From these programs, the Company realized approximately $80 million of pre-tax savings in 1996, and expects to achieve average annual pre-tax savings 18 10 of $160 million in 1997 and future years. These savings are not necessarily indicative of future incremental earnings due to management's commitment to invest in competitive business strategies, new markets, and growth opportunities. In addition to the non-recurring charges reported during 1995 and 1996 for streamlining initiatives, the Company incurred charges for the following unusual items: - -- During 1995, the Company included in non-recurring charges $73.8 million of asset impairment losses, which 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 in its North American and Asia-Pacific operations. - -- During the third quarter of 1996, the Company included in non-recurring charges a provision of $15.0 million for the potential settlement of certain litigation. - -- During the fourth quarter of 1996, the Company included in other expense a charge of $35.0 million for a contribution to the Kellogg's Corporate Citizenship Fund, which is expected to satisfy the charitable-giving plans of this private trust through the year 2000. In summary, total pre-tax non-recurring charges and other unusual items were $421.8 million in 1995 ($271.3 million after tax or $1.24 per share) and $171.1 million in 1996 ($120.1 million after tax or $.57 per share). The foregoing discussion of non-recurring charges contains forward-looking statements regarding amounts of headcount reductions, cash requirements, and realizable savings. Actual amounts may vary depending on the final determination of important factors such as identification of specific employees to be separated from pre-determined pools; the impact of attrition on involuntary separation programs; the level of employee participation in out-placement programs, health care, and other separation benefits; actual amounts of asset removal and relocation costs; dates of asset disposal and costs to maintain assets up to the date of disposal; proceeds from asset disposals; final negotiation of third party contract buy-outs; and other items. 11 1997 OUTLOOK Management believes the Company's implementation of certain pricing measures during 1996 improved the long-term brand value proposition to the consumer, but has negatively impacted profitability in the short term, extending through the first quarter of 1997. However, management believes that, during 1997, the Company will derive benefits from the continued implementation of its global business model, including innovative and differentiated new-product introductions and further operational efficiencies. The Company will continue to pursue streamlining and productivity initiatives to optimize its cost structure. Additionally, management expects continued record cereal volume levels in the Company's Latin American and Asia-Pacific regions and strong growth in other convenience foods volume. Additional expectations for 1997 include an effective tax rate of 36-37%, capital spending in line with the prior-year level of approximately $300 million, continued increases in shareholder dividends, and common stock repurchase activity of approximately $415 million. Management expects total interest expense for 1997 to increase by 70-80% over 1996 amounts due to higher debt levels. 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 strong credit rating, balance sheet, and earnings history provide a base for obtaining additional financial resources at competitive rates and terms. The foregoing projections of volume growth, profitability, capital spending, shareholder dividends, and common stock repurchase activity are forward-looking statements which involve risks and uncertainties. Actual 1997 results may differ materially due to the impact of the Company's pricing strategies on volumes; the level of marketing spending and/or incremental pricing actions required to maintain the Company's market share leadership position; general economic and market conditions; actual volumes and product mix; the levels of spending on capital, continued streamlining initiatives, and other general and administrative costs; raw material price and labor cost fluctuations; changes in statutory tax law; interest rates available on short-term financing; the impact of stock market conditions on common stock repurchase activity; and other items. 19 12 Kellogg Company and Subsidiaries CONSOLIDATED STATEMENT OF EARNINGS
Year ended December 31, ========================================================================================== (millions, except per share data) 1996 1995 1994 - ------------------------------------------------------------------------------------------ NET SALES $6,676.6 $7,003.7 $6,562.0 - ------------------------------------------------------------------------------------------ Cost of goods sold 3,122.9 3,177.7 2,950.7 Selling and administrative expense 2,458.7 2,566.7 2,448.7 Non-recurring charges 136.1 421.8 - - ------------------------------------------------------------------------------------------ OPERATING PROFIT 958.9 837.5 1,162.6 - ------------------------------------------------------------------------------------------ Interest expense 65.6 62.6 45.4 Other income (expense), net (33.4) 21.1 12.8 - ------------------------------------------------------------------------------------------ EARNINGS BEFORE INCOME TAXES 859.9 796.0 1,130.0 Income taxes 328.9 305.7 424.6 - ------------------------------------------------------------------------------------------ NET EARNINGS $531.0 $490.3 $705.4 - ------------------------------------------------------------------------------------------ NET EARNINGS PER SHARE $2.50 $2.24 $3.15 ==========================================================================================
Refer to Notes to Consolidated Financial Statements. 13 Kellogg Company and Subsidiaries CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
======================================================================================================== Common stock Capital in Treasury stock -------------------- excess of Retained ------------------ (millions, except per share data) shares amount par value earnings shares amount - -------------------------------------------------------------------------------------------------------- Balance, January 1, 1994 310.3 $77.6 $72.0 $3,409.4 82.4 ($1,653.1) Stock options exercised 0.1 2.3 Net earnings 705.4 Dividends ($1.40 per share) (313.6) Exchange adjustments Minimum pension liability adjustment Common stock repurchases 6.2 (327.3) Other (5.7) 0.1 (0.2) - -------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1994 310.4 77.6 68.6 3,801.2 88.7 (1,980.6) Stock options exercised 0.7 0.2 36.6 Net earnings 490.3 Dividends ($1.50 per share) (328.5) Exchange adjustments 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) Stock options exercised 0.4 0.1 18.7 Net earnings 531.0 Dividends ($1.62 per share) (343.7) Exchange adjustments Common stock repurchases 7.4 (535.7) Other 0.1 (6.5) - -------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1996 311.5 $77.9 $123.9 $4,150.3 101.9 ($2,903.4) ========================================================================================================
============================================================================= Minimum pension Currency Total liability translation shareholders' (millions, except per share data) adjustment adjustment equity - ----------------------------------------------------------------------------- Balance, January 1, 1994 ($25.3) ($167.2) $1,713.4 Stock options exercised 2.3 Net earnings 705.4 Dividends ($1.40 per share) (313.6) Exchange adjustments 7.9 7.9 Minimum pension liability adjustment 25.3 25.3 Common stock repurchases (327.3) Other (5.9) - ----------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1994 -- (159.3) 1,807.5 Stock options exercised 36.8 Net earnings 490.3 Dividends ($1.50 per share) (328.5) Exchange adjustments (34.6) (34.6) Common stock repurchases (374.7) Other (5.9) - ----------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1995 -- (193.9) 1,590.9 Stock options exercised 18.8 Net earnings 531.0 Dividends ($1.62 per share) (343.7) Exchange adjustments 27.6 27.6 Common stock repurchases (535.7) Other (6.5) - ----------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1996 $ -- ($166.3) $1,282.4 =============================================================================
Refer to Notes to Consolidated Financial Statements. 20 14 Kellogg Company and Subsidiaries CONSOLIDATED BALANCE SHEET
At December 31, ========================================================================================== (millions, except share data) 1996 1995 - ------------------------------------------------------------------------------------------ CURRENT ASSETS Cash and cash equivalents $243.8 $221.9 Accounts receivable, less allowances of $6.6 and $6.4 592.3 590.1 Inventories 424.9 376.7 Other current assets 267.6 240.1 - ------------------------------------------------------------------------------------------ TOTAL CURRENT ASSETS 1,528.6 1,428.8 - ------------------------------------------------------------------------------------------ PROPERTY, NET 2,932.9 2,784.8 OTHER ASSETS 588.5 201.0 - ------------------------------------------------------------------------------------------ TOTAL ASSETS $5,050.0 $4,414.6 ========================================================================================== CURRENT LIABILITIES Current maturities of long-term debt $501.2 $1.9 Notes payable 652.6 188.0 Accounts payable 335.2 370.8 Other current liabilities 710.0 704.7 - ------------------------------------------------------------------------------------------ TOTAL CURRENT LIABILITIES 2,199.0 1,265.4 - ------------------------------------------------------------------------------------------ LONG-TERM DEBT 726.7 717.8 OTHER LIABILITIES 841.9 840.5 SHAREHOLDERS' EQUITY Common stock, $.25 par value, 500,000,000 shares authorized Issued: 311,524,437 shares in 1996 and 311,128,152 in 1995 77.9 77.8 Capital in excess of par value 123.9 105.2 Retained earnings 4,150.3 3,963.0 Treasury stock, at cost: 101,876,325 shares in 1996 and 94,423,270 in 1995 (2,903.4) (2,361.2) Currency translation adjustment (166.3) (193.9) - ------------------------------------------------------------------------------------------ TOTAL SHAREHOLDERS' EQUITY 1,282.4 1,590.9 - ------------------------------------------------------------------------------------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,050.0 $4,414.6 ==========================================================================================
Refer to Notes to Consolidated Financial Statements. 21 15 KELLOGG COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31, ========================================================================================= (millions) 1996 1995 1994 - ----------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net earnings $531.0 $490.3 $705.4 Items in net earnings not requiring (providing) cash: Depreciation 251.5 258.8 256.1 Pre-tax gain on sale of subsidiaries --- --- (26.7) Deferred income taxes 58.0 (78.7) 24.5 Non-recurring charges, net of cash paid 90.6 385.3 --- Other 14.5 9.1 22.2 Postretirement benefit contributions (156.8) (74.5) (71.5) Changes in operating assets and liabilities (77.3) 50.7 56.8 - ----------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 711.5 1,041.0 966.8 - ----------------------------------------------------------------------------------------- INVESTING ACTIVITIES Additions to properties (307.3) (315.7) (354.3) Acquisitions of businesses (505.2) --- --- Proceeds from sale of subsidiaries --- --- 95.5 Property disposals 11.6 6.3 15.6 Other 14.1 0.5 7.8 - ----------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (786.8) (308.9) (235.4) - ----------------------------------------------------------------------------------------- FINANCING ACTIVITIES Net issuances (reductions) of notes payable, with maturities less than or equal to 90 days 906.6 (86.8) (111.9) Issuances of notes payable, with maturities greater than 90 days 137.0 --- --- Reductions of notes payable, with maturities greater than 90 days (79.0) --- --- Issuances of long-term debt --- --- 200.0 Reductions of long-term debt (3.4) (0.4) (2.9) Issuances of common stock 18.8 36.8 2.3 Common stock repurchases (535.7) (374.7) (327.3) Cash dividends (343.7) (328.5) (313.6) Other (6.6) (5.6) (6.1) - ----------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 94.0 (759.2) (559.5) - ----------------------------------------------------------------------------------------- Effect of exchange rate changes on cash 3.2 (17.3) (3.7) - ----------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 21.9 (44.4) 168.2 Cash and cash equivalents at beginning of year 221.9 266.3 98.1 - ----------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $243.8 $221.9 $266.3 =========================================================================================
Refer to Notes to Consolidated Financial Statements. 22 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Kellogg Company and Subsidiaries 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 interest associated with significant capital projects. Advertising The costs of advertising are generally expensed as incurred. Stock compensation The Company follows Accounting Principles Board Opinion (APB) #25, "Accounting for Stock Issued to Employees," in accounting for its employee stock options and other stock-based compensation. Under APB #25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized. As permitted, the Company has elected to adopt the disclosure provisions only of Statement of Financial Accounting Standards (SFAS) #123, "Accounting for Stock-Based Compensation." (Refer to Note 7 for further information.) 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. 17 NOTE 2 ACQUISITION On December 16, 1996, the Company purchased certain assets and liabilities of the Lender's Bagels business from Kraft Foods, Inc. for $466 million in cash, including related acquisition costs. The acquisition was accounted for as a purchase. Accordingly, the assets and liabilities of the acquired business are included in the consolidated balance sheet as of December 31, 1996. The results of Lender's operations from the date of the acquisition to December 31, 1996, were not significant. The acquisition was initially financed through commercial paper borrowings which were replaced with long-term debt in January 1997. The components of intangible assets included in the allocation of purchase price, along with the related straight-line amortization periods, were:
============================================================= Amount Amortization (millions) period (yrs.) - ------------------------------------------------------------- Trademarks and tradenames $150.0 40 Non-compete covenants 20.0 5 Goodwill 183.6 40 - ------------------------------------------------------------- Total $353.6 =============================================================
The unaudited pro forma combined historical results, as if the Lender's Bagels business had been acquired at the beginning of fiscal 1996 and 1995, respectively, are estimated to be:
============================================================= (millions, except per share data) 1996 1995 - ------------------------------------------------------------- Net sales $6,873.1 $7,219.4 Net earnings $524.3 $489.3 Net earnings per share $2.47 $2.23 =============================================================
The pro forma results include amortization of the intangibles presented above and interest expense on debt assumed issued to finance the purchase. The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of the beginning of each of the fiscal periods presented, nor are they necessarily indicative of future consolidated results. 18 NOTE 3 NON-RECURRING CHARGES Operating profit for 1996 includes non-recurring charges of $136.1 million ($97.8 million after tax or $.46 per share), comprised of $121.1 million for streamlining initiatives and $15.0 million for potential settlement of certain litigation. Operating profit for 1995 includes non-recurring charges of $421.8 million ($271.3 million after tax or $1.24 per share), comprised of $348.0 million for streamlining initiatives and $73.8 million for asset impairment losses. Streamlining initiatives During 1995, the Company incurred pre-tax non-recurring charges of $348.0 million related to operational streamlining initiatives in the U.S., Australia, and Europe. The Company eliminated approximately 2,000 employee positions by the end of 1996, through a combination of voluntary early retirement incentives, voluntary and involuntary severance programs, and attrition. Associated with these 1995 initiatives, the Company incurred during 1996 an additional $22 million in costs related to workforce and production redeployment which were expensed as incurred throughout the year. At year-end 1995, the Company had $94 million of reserves for future cash outlays related to these programs, of which $23 million was reversed during 1996 due to lower than expected employee severance payments, asset removal costs, and other favorable factors. In 1996, the Company initiated a plan to better serve the Pan-European marketplace by consolidating and reorganizing certain aspects of its European operations, and took action to further streamline operations in the U.S. and other international locations. As a result, approximately 600 additional employee positions are expected to be eliminated by the end of 1997. Charges related to 1996 initiatives were $122.1 million, which, in combination with the aforementioned reversals of $23 million and redeployment expenditures of $22 million, resulted in net pre-tax non-recurring charges during 1996 of $121.1 million. 23 19 From all of the streamlining initiatives currently underway, the Company incurred pre-tax cash outlays of approximately $120 million in 1996 and expects to incur $50 million in 1997. The components of the streamlining charges, as well as reserve balances remaining at December 31, 1996 and 1995, were:
===================================================================================== Employee retirement & severance Asset Asset Other (millions) benefits (a) write-offs removal costs Total - ------------------------------------------------------------------------------------- 1995 streamlining charges $183.6 $106.5 $39.5 $18.4 $348.0 Amounts utilized during 1995 (126.1) (106.5) (3.0) (18.4) (254.0) - ------------------------------------------------------------------------------------- Remaining reserve at December 31, 1995 57.5 --- 36.5 --- 94.0 1996 streamlining charges 31.4 37.5 13.5 38.7 121.1 Amounts utilized during 1996 (65.0) (37.5) (19.6) (38.7) (160.8) - ------------------------------------------------------------------------------------- Remaining reserve at December 31, 1996 $23.9 $ --- $30.4 $ --- $54.3 =====================================================================================
(a) Includes approximately $100 and $5 of pension and postretirement health care curtailment losses and special termination benefits recognized in 1995 and 1996, respectively. (Refer to Notes 8 and 9.) Other Also included in the 1995 charges were $73.8 million of asset impairment losses, which 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 in its North American and Asia-Pacific operations. NOTE 4 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 expense for 1996 includes a charge of $35.0 million ($22.3 million after tax or $.11 per share) for a contribution to the Kellogg's Corporate Citizenship Fund, a private trust established for charitable donations. This contribution is expected to satisfy the charitable-giving plans of this trust through the year 2000. 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 charges 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. NOTE 5 LEASES Operating leases are generally for equipment and warehouse space. Rent expense on all operating leases was $37.9 million in 1996, $32.0 million in 1995, and $37.5 million in 1994. At December 31, 1996, future minimum annual rental commitments under non-cancelable operating leases totaled $51 million consisting of (in millions): 1997-$17; 1998-$10; 1999-$7; 2000-$5; 2001-$5; 2002 and beyond-$7. 20 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, 1996 (including $500 million classified in long-term debt, as discussed in (d) below), were $1.12 billion with an effective interest rate of 5.4% and at December 31, 1995, were $173.4 million with an effective interest rate of 5.7%. At December 31, 1996, the Company had $899.6 million of short-term lines of credit, of which $866.8 million were unused and available for borrowing on an unsecured basis. Long-term debt at year-end consisted of:
======================================================== (millions) 1996 1995 - -------------------------------------------------------- (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 299.9 299.6 (d)Commercial paper 500.0 --- Other 28.0 20.1 - -------------------------------------------------------- 1,227.9 719.7 Less current maturities (501.2) (1.9) - -------------------------------------------------------- Balance, December 31 $726.7 $717.8 ========================================================
(a) In September 1994, the Company issued $200 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 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 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. (d) At December 31, 1996, $500 of the Company's commercial paper was classified as long-term, based on the Company's intent and ability to refinance as evidenced by an issuance of $500 of 7-year 6.625% fixed rate Euro Dollar Notes on January 29, 1997. In conjunction with this issuance, the Company settled $500 notional amount of interest rate forward swap agreements which effectively fixed the interest rate on this debt at 6.354%. This debt was issued primarily to finance the purchase of the Lender's Bagels business on December 16, 1996. (Refer to Note 2 for further information.) The $200 million of three-year notes and $300 million of five-year notes will mature during the third quarter of 1997 and are classified in current maturities as of December 31, 1996. Management currently intends to replace these borrowings with new long-term debt issuances as of the maturity dates and, as of year-end 1996, had entered into $150 million notional amount of interest rate forward swap agreements to pay fixed and receive variable interest, effectively fixing the U.S. Treasury rate on which an equivalent amount of future issuances would be priced. 21 In August 1993, the Company filed a $200 million "shelf registration" with the Securities and Exchange Commission which remained unused at December 31, 1996. Scheduled principal repayments on long-term debt are (in millions): 1997-$501; 1998-$214; 1999-$1; 2000-$1; 2001-$1; 2002 and beyond-$510. Interest paid, net of amounts capitalized, approximated interest expense in each of the three years ended December 31, 1996. Interest expense capitalized as part of the construction cost of fixed assets was (in millions): 1996-$3.8; 1995-$7.2; 1994-$6.9. 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 8,905,323 and 7,767,979 shares were available for grant at January 1, 1996, and December 31, 1996, respectively. Under the Kellogg Employee Stock Ownership Plan, options 24 22 for 4,822,437 and 4,140,065 shares were available for grant at January 1, 1996, and December 31, 1996, respectively. Transactions under these plans were:
====================================================================================== 1996 1995 1994 - -------------------------------------------------------------------------------------- Under option, January 1 4,216,481 3,805,335 2,434,587 Granted 2,589,163 2,392,201 1,607,984 Exercised (1,051,583) (1,915,322) (85,647) Cancelled (130,004) (65,733) (151,589) - -------------------------------------------------------------------------------------- Under option, December 31 5,624,057 4,216,481 3,805,335 ====================================================================================== Exercisable, December 31 3,822,441 3,052,873 3,034,195 ====================================================================================== Shares available, December 31, for options that may be granted 11,908,044 13,727,760 15,178,143 ====================================================================================== Average prices per share Under option, January 1 $59 $56 $57 Granted 75 61 53 Exercised 60 55 38 Cancelled 59 53 55 - -------------------------------------------------------------------------------------- Under option, December 31 $66 $59 $56 - -------------------------------------------------------------------------------------- Exercisable, December 31 $69 $62 $58 ======================================================================================
The Company has adopted the disclosure provisions of SFAS #123 "Accounting for Stock-Based Compensation." This standard requires pro forma disclosures of net earnings and earnings per share as if the Company had accounted for its employee stock options using a fair value method. The fair value of these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions:
====================================================== 1996 1995 - ------------------------------------------------------ Risk free interest rate 6.16% 6.89% Dividend yield 2.30% 2.30% Volatility 19.16% 21.45% Average expected term (years) 3.34 3.02 ======================================================
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma results, including the impact of employee stock options granted after December 31, 1994, are estimated to be:
============================================================== (millions, except per share data) 1996 1995 - -------------------------------------------------------------- Compensation expense recognized for stock options net of income tax effect of $10.0 and $8.2 $16.9 $13.9 Net earnings $514.1 $476.4 Net earnings per share $2.42 $2.18 ==============================================================
Employee stock options outstanding and exercisable under these plans as of December 31, 1996, were:
============================================================================== Weighted Weighted average Weighted Range of average remaining average exercise exercise contractual exercise prices Outstanding price life (yrs.) Exercisable price - ------------------------------------------------------------------------------ $30 - 49 88,284 $37 3.2 88,284 $37 50 - 59 1,705,736 54 7.2 664,950 57 60 - 69 1,064,766 65 5.1 1,064,766 65 70 - 79 2,765,271 75 8.3 2,004,441 76 - ------------------------------------------------------------------------------ 5,624,057 3,822,441 ==============================================================================
23 NOTE 8 PENSION BENEFITS The Company has a number of U.S. and foreign 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 6.8% and 8.9% of consolidated plan assets at December 31, 1996 and 1995, respectively. The components of pension expense were:
=================================================================== (millions) 1996 1995 1994 - ------------------------------------------------------------------- Service cost $27.6 $27.4 $29.0 Interest cost 72.8 66.0 60.3 Actual return on plan assets (102.8) (163.3) (3.5) Net amortization and deferral 19.7 100.3 (51.0) Curtailment loss and special termination benefits expense 4.0 77.7 --- - ------------------------------------------------------------------- Pension expense - Company plans 21.3 108.1 34.8 Pension expense - multiemployer plans 2.0 1.8 2.0 - ------------------------------------------------------------------- Total pension expense $23.3 $109.9 $36.8 ===================================================================
The worldwide weighted average actuarial assumptions were:
======================================================================== 1996 1995 1994 - ------------------------------------------------------------------------ Discount rate 7.9% 7.5% 8.3% Long-term rate of compensation increase 5.2% 5.1% 5.3% Long-term rate of return on plan assets 10.5% 9.6% 9.5% ========================================================================
Reconciliation of funded status of the plans at year-end was:
======================================================================== Underfunded Overfunded (millions) 1996 1995 1996 1995 - ------------------------------------------------------------------------ Accumulated benefit obligation: Nonvested $6.0 $43.3 $46.9 $37.3 Vested 41.5 228.9 845.2 562.9 - ------------------------------------------------------------------------ Total 47.5 272.2 892.1 600.2 Projected salary increases 17.4 60.9 79.3 45.0 - ------------------------------------------------------------------------ Projected benefit obligation 64.9 333.1 971.4 645.2 Plan assets at fair value --- 227.8 1,048.7 680.3 - ------------------------------------------------------------------------ Assets (less) greater than projected benefit obligation (64.9) (105.3) 77.3 35.1 Unrecognized net loss 15.0 46.0 28.8 22.8 Unrecognized transition amount (2.8) (5.1) 0.6 2.2 Unrecognized prior service cost 3.4 11.8 49.3 38.5 Minimum liability adjustment (5.7) (7.3) --- --- - ------------------------------------------------------------------------ Prepaid (accrued) pension ($55.0) ($59.9) $156.0 $98.6 ========================================================================
Curtailment losses and special termination benefits expense recognized in 1995 and 1996 relate to operational workforce reduction initiatives undertaken during these years and are recorded as a component of non-recurring charges. (Refer to Note 3 for further information.) The amount of intangible assets related to underfunded pension plans was $5.7 million and $7.3 million at year-end 1996 and 1995, respectively. All gains and losses, other than curtailment losses, are recognized over the average remaining service period of active employees. Certain of the Company's subsidiaries sponsor 401(k) or similar savings plans for active employees. Expense related to these plans was (in millions): 1996-$17; 1995-$18; 1994-$16. 24 NOTE 9 NONPENSION POSTRETIREMENT BENEFITS Certain of the Company's North American subsidiaries provide health care and 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) 1996 1995 1994 - ---------------------------------------------------------------------------- Service cost $11.2 $11.8 $13.3 Interest cost 40.2 41.5 39.2 Net amortization and deferral 0.3 (0.6) 3.1 Curtailment loss 1.0 26.3 - - ---------------------------------------------------------------------------- Postretirement benefit expense $52.7 $79.0 $55.6 ============================================================================ Discount rate used for accumulated benefit obligation 7.75% 7.25% 8.50% ============================================================================
25 25 The assumed health care cost trend rate was 7.5% for 1996, decreasing gradually to 5.0% by the year 2002 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, 1996, by $59.8 million and postretirement benefit expense for 1996 by $7.2 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 and 1996 relate to operational workforce reduction initiatives undertaken during these years and were recorded as a component of non-recurring charges. (Refer to Note 3 for further information.) In December 1996, the Company contributed $81 million to a voluntary employee benefit association (VEBA) trust for the initial funding of its nonpension postretirement benefit obligations. Plan assets consist primarily of equity securities with smaller holdings of bonds. The accrued postretirement benefit cost included in the balance sheet at year-end was:
======================================================================= (millions) 1996 1995 - ----------------------------------------------------------------------- Accumulated benefit obligation: Retirees $305.9 $270.2 Active plan participants 188.2 300.9 - ----------------------------------------------------------------------- 494.1 571.1 Plan assets at fair value (81.0) - ----------------------------------------------------------------------- Accumulated benefit obligation greater than assets 413.1 571.1 Unrecognized experience gain (loss) 95.1 (14.2) Unrecognized prior service adjustments 8.6 9.2 - ----------------------------------------------------------------------- Accrued postretirement benefit cost $516.8 $566.1 =======================================================================
NOTE 10 INCOME TAXES Earnings before income taxes and the provision for U.S. federal, state, and foreign taxes on these earnings were:
============================================================================ (millions) 1996 1995 1994 - ---------------------------------------------------------------------------- Earnings before income taxes: United States $516.7 $430.9 $729.9 Foreign 343.2 365.1 400.1 - ---------------------------------------------------------------------------- $859.9 $796.0 $1,130.0 ============================================================================ Income taxes: Currently payable: Federal $130.6 $205.2 $207.4 State 21.9 34.7 42.4 Foreign 118.4 144.5 150.3 - ---------------------------------------------------------------------------- 270.9 384.4 400.1 - ---------------------------------------------------------------------------- Deferred: Federal 45.7 (81.0) 18.1 State 11.4 (10.7) 0.2 Foreign 0.9 13.0 6.2 - ---------------------------------------------------------------------------- 58.0 (78.7) 24.5 - ---------------------------------------------------------------------------- Total income taxes $328.9 $305.7 $424.6 ============================================================================
The difference between the U.S. federal statutory tax rate and the Company's effective rate was:
============================================================================= 1996 1995 1994 - ----------------------------------------------------------------------------- U.S. statutory rate 35.0% 35.0% 35.0% Foreign rates varying from 35% 0.7 0.2 0.2 State income taxes, net of federal benefit 2.5 2.0 2.5 Net change in valuation allowance (0.1) 1.9 0.1 Other 0.1 (0.7) (0.2) - ----------------------------------------------------------------------------- Effective income tax rate 38.2% 38.4% 37.6% =============================================================================
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 3) for which no tax benefit was currently provided, based on management's assessment of the likelihood of recovering such benefit in future years. The deferred tax assets and liabilities included in the balance sheet at year-end were:
========================================================================================= Deferred tax assets Deferred tax liabilities (millions) 1996 1995 1996 1995 - ----------------------------------------------------------------------------------------- Current: Promotion and advertising $78.4 $43.3 $6.7 $6.3 Wages and payroll taxes 13.8 24.9 --- --- Health and postretirement benefits 17.2 15.5 6.3 10.4 State taxes 8.6 9.8 --- --- Other 23.5 17.3 23.3 18.2 - ----------------------------------------------------------------------------------------- 141.5 110.8 36.3 34.9 Less valuation allowance (2.5) --- --- --- - ----------------------------------------------------------------------------------------- 139.0 110.8 36.3 34.9 ========================================================================================= Noncurrent: Depreciation and asset disposals 25.6 24.7 337.0 280.2 Postretirement benefits 179.4 196.3 43.0 6.7 Capitalized interest 3.3 3.1 31.5 32.8 State taxes 0.9 11.1 --- --- Other 27.9 13.2 0.7 9.9 - ----------------------------------------------------------------------------------------- 237.1 248.4 412.2 329.6 Less valuation allowance (29.1) (32.7) --- --- - ----------------------------------------------------------------------------------------- 208.0 215.7 412.2 329.6 - ----------------------------------------------------------------------------------------- Total deferred taxes $347.0 $326.5 $448.5 $364.5 =========================================================================================
At December 31, 1996, foreign subsidiary earnings of $1.31 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 $72 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): 1996-$281; 1995-$404; 1994-$396. 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 fair values of derivative financial instruments held by the Company were not significant during the periods presented. 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 statement of earnings 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 $80.0 million and $131.1 million at December 31, 1996 and 1995, respectively. 26 26 The Company enters into currency and interest rate swaps, including forward swaps, in connection with certain debt issues. 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. Interest rate forward swaps are used to effectively fix the U.S. Treasury or other benchmark rate on which planned future issuances of long-term debt will be priced, thereby minimizing the risk of fluctuations in future borrowing costs related to short-term interest rate movements. 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 $1.05 billion at December 31, 1996, of which $500 million were settled in conjunction with an issuance of long-term debt in January 1997. The notional amounts of currency and interest rate swaps were $400 million at December 31, 1995. (Refer to Note 6 for further information.) 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. 27 NOTE 12 QUARTERLY FINANCIAL DATA (unaudited)
===================================================================== (millions, except Net sales Gross profit per share data) 1996 1995 1996 1995 - --------------------------------------------------------------------- First $1,785.9 $1,716.0 $995.5 $946.7 Second 1,651.4 1,780.1 876.2 960.4 Third 1,681.6 1,844.7 865.6 1,009.1 Fourth 1,557.7 1,662.9 816.4 909.8 - --------------------------------------------------------------------- $6,676.6 $7,003.7 $3,553.7 $3,826.0 =====================================================================
Net earnings (a) Earnings per share (a) 1996 1995 1996 1995 - --------------------------------------------------------------------- First $206.1 $196.0 $0.96 $0.89 Second 78.1 135.9 .37 0.62 Third 159.5 230.0 .75 1.05 Fourth 87.3 (71.6) 0.42 (0.33) - --------------------------------------------------------------------- $531.0 $490.3 =====================================================================
(a) The quarterly results of 1996 and 1995 include the following non-recurring charges and other unusual items. (Refer to Notes 3 and 4 for further information.)
================================================== Net earnings Earnings per share 1996 1995 1996 1995 -------------------------------------------------- First ($6.1) $ --- ($0.03) $ --- Second (16.9) (33.0) (0.08) (0.15) Third (21.3) --- (0.10) --- Fourth (75.8) (238.3) (0.36) (1.10) -------------------------------------------------- ($120.1) ($271.3) ==================================================
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 1996, the closing price (on the NYSE) was $65 5/8 and there were 26,751 shareholders of record. Dividends paid per share of common stock increased 8% to $1.62 in 1996, marking the 40th consecutive year of increase. Dividends paid and the quarterly price ranges on the NYSE during the last two years were:
========================================================= 1996 - Quarter Dividend High Low - --------------------------------------------------------- Fourth $0.42 $69.13 $62.00 Third 0.42 77.38 65.63 Second 0.39 75.75 67.38 First 0.39 80.63 72.50 - --------------------------------------------------------- $1.62 - --------------------------------------------------------- 1995 - Quarter - --------------------------------------------------------- Fourth $0.39 $79.50 $70.50 Third 0.39 73.63 66.75 Second 0.36 73.88 58.00 First 0.36 60.68 52.50 - --------------------------------------------------------- $1.50 =========================================================
28 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, cereal bars, and bagels 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) 1996 change 1995 change 1994 change - --------------------------------------------------------------------------------------------- NET SALES - --------------------------------------------------------------------------------------------- United States $3,779.5 -7 $4,080.3 6 $3,840.8 2 % of total 57% 58% 59% Europe 1,749.6 -4 1,829.1 9 1,683.7 9 % of total 26% 26% 26% Other areas 1,147.5 5 1,094.3 5 1,037.5 7 % of total 17% 16% 15% - --------------------------------------------------------------------------------------------- Consolidated $6,676.6 -5 $7,003.7 7 $6,562.0 4 ============================================================================================= OPERATING PROFIT (a) - --------------------------------------------------------------------------------------------- United States $611.2 38 $443.1 -37 $708.5 14 % of total 64% 53% 61% Europe 204.4 -30 293.6 2 287.5 24 % of total 21% 35% 25% Other areas 143.3 42 100.8 -39 166.6 10 % of total 15% 12% 14% - --------------------------------------------------------------------------------------------- Consolidated $958.9 14 $837.5 -28 $1,162.6 16 ============================================================================================= IDENTIFIABLE ASSETS - --------------------------------------------------------------------------------------------- United States $2,785.9 27 $2,194.8 -1 $2,222.7 -5 % of total 55% 50% 50% Europe 1,258.2 -1 1,269.4 -1 1,282.5 21 % of total 25% 29% 29% Other areas 973.3 5 929.7 -1 943.2 17 % of total 19% 21% 21% Corporate assets 32.6 57 20.7 9 18.9 -17 % of total 1% - - - --------------------------------------------------------------------------------------------- Consolidated $5,050.0 14 $4,414.6 -1 $4,467.3 5 =============================================================================================
(a) Operating profit for 1996 and 1995 includes the following non-recurring charges, by geographic area. (Refer to Note 3 and to Management's Discussion & Analysis on pages 14-19 for further information.)
===================================================== 1996 1995 ---------------------------------------------------- United States ($24.1) ($325.0) Europe (76.5) (38.4) All other (35.5) (58.4) ---------------------------------------------------- Consolidated ($136.1) ($421.8) =====================================================
27 29 NOTE 14 SUPPLEMENTAL FINANCIAL STATEMENT DATA
(millions) ======================================================================================== Consolidated Statement of Earnings 1996 1995 1994 - ---------------------------------------------------------------------------------------- Research and development expense $84.3 $72.2 $71.7 Advertising expense $778.9 $891.5 $856.9 ========================================================================================
======================================================================================== Consolidated Statement of Cash Flows 1996 1995 1994 - ---------------------------------------------------------------------------------------- Accounts receivable $10.9 ($25.6) ($27.7) Inventories (35.4) 19.6 6.8 Other current assets (0.5) (33.7) (5.4) Accounts payable (41.0) 36.3 25.7 Other current liabilities (11.3) 54.1 57.4 - ---------------------------------------------------------------------------------------- CHANGES IN OPERATING ASSETS AND LIABILITIES ($77.3) $50.7 $56.8 ========================================================================================
======================================================================================== CONSOLIDATED BALANCE SHEET 1996 1995 - ---------------------------------------------------------------------------------------- Raw materials and supplies $135.2 $129.7 Finished goods and materials in process 289.7 247.0 - ---------------------------------------------------------------------------------------- INVENTORIES $424.9 $376.7 - ---------------------------------------------------------------------------------------- Deferred income taxes $117.9 $91.2 Prepaid advertising and promotion 83.4 77.6 Other 66.3 71.3 - ---------------------------------------------------------------------------------------- OTHER CURRENT ASSETS $267.6 $240.1 - ---------------------------------------------------------------------------------------- Land $52.4 $50.0 Buildings 1,226.1 1,202.8 Machinery and equipment 3,464.1 3,283.0 Construction in progress 277.5 202.0 Accumulated depreciation (2,087.2) (1,953.0) - ---------------------------------------------------------------------------------------- PROPERTY, NET $2,932.9 $2,784.8 - ---------------------------------------------------------------------------------------- Goodwill $193.7 $2.2 Other intangibles 186.6 7.4 Other 208.2 191.4 - ---------------------------------------------------------------------------------------- OTHER ASSETS $588.5 $201.0 - ---------------------------------------------------------------------------------------- Accrued income taxes $50.5 $64.2 Accrued salaries and wages 84.6 121.8 Accrued advertising and promotion 336.8 266.3 Other 238.1 252.4 - ---------------------------------------------------------------------------------------- OTHER CURRENT LIABILITIES $710.0 $704.7 - ---------------------------------------------------------------------------------------- Nonpension postretirement benefits $494.2 $546.1 Deferred income taxes 226.3 201.7 Other 121.4 92.7 - ---------------------------------------------------------------------------------------- OTHER LIABILITIES $841.9 $840.5 - ---------------------------------------------------------------------------------------- ========================================================================================
30 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, of shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Kellogg Company and its subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, 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 January 31, 1997 28 EX-23.01 5 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 January 31, 1997 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 26, 1997 EX-23.02 6 EXHIBIT 23.02 1 EXHIBIT 23.02 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement of Form S-8 (No. 33-27294) of Kellogg Company of our report dated March 11, 1997 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 11, 1997 which appears on page 1 of Exhibit 99.02 of this Form 10-K. PRICE WATERHOUSE LLP Battle Creek, Michigan March 26, 1997 EX-24.01 7 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, 1996, 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. [sig] ------------------------------ Director Dated: January 24, 1997 C.X. Gonzalez January 27, 1997 Gordon Gund January 30, 1997 W.E. LaMothe January 30, 1997 A. G. Langbo January 23, 1997 Russell G. Mawby January 30, 1997 Ann McLaughlin January 22, 1997 J. R. Munro January 22, 1997 H. A. Poling January 30, 1997 William C. Richardson January 30, 1997 Donald Rumsfeld February 1, 1997 Tim Smucker January 27, 1997 Dolores D. Wharton January 23, 1997 John L. Zabriskie EX-27 8 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM KELLOGG COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 244 0 599 (7) 425 1,529 5,020 (2,087) 5,050 2,199 727 0 0 78 1,204 5,050 6,677 6,677 3,123 3,123 2,628 0 66 860 329 531 0 0 0 531 2.50 2.50
EX-99.01 9 EXHIBIT 99.01 1 KELLOGG COMPANY AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION OCTOBER 31, 1996 2 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, 1996 AND 1995 AND FOR THE YEARS THEN ENDED: Statement of assets available for benefits, with fund information 2-3 Statement of changes in assets available for benefits, with fund information 4-5 Notes to financial statements 6-10 ADDITIONAL INFORMATION: Item 27a - Schedule of assets held for investment purposes - October 31, 1996 11 Item 27b - Schedule of loans or fixed income obligations - October 31, 1996 12-48 Item 27d - Schedule of reportable transactions - year ended October 31, 1996 49
3 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, 1996 and 1995, and the changes in assets available for benefits for the years then ended, 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 11 - 49 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 11, 1997 4 KELLOGG COMPANY 2 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION OCTOBER 31, 1996
FIXED COMPANY LOAN BOND INCOME EQUITY STOCK TOTAL FUND FUND FUND FUND FUND ASSETS: Receivables: Employer contributions $ 553,041 $ - $ 7,926 $ 288,952 $ 88,533 $ 167,630 Employee contributions 14,639 14,639 Interest 53,867 53,867 ------------ ----------- ---------- ------------ ----------- ----------- Total receivables 621,547 7,926 357,458 88,533 167,630 ------------ ----------- ---------- ------------ ----------- ----------- Investments: Plan's interest in Master Trust 138,574,423 6,564,519 65,003,279 67,006,625 Interfund borrowings 1,108,530 (1,108,530) Guaranteed investment contracts 472,790,551 472,790,551 Loans to participants 10,692,528 10,692,528 TBC Pooled Funds Daily Liquidity 7,304,194 7,304,194 ------------ ----------- ---------- ------------ ----------- ----------- Total investments 629,361,696 10,692,528 6,564,519 481,203,275 63,894,749 67,006,625 ------------ ----------- ---------- ------------ ----------- ----------- Assets available for benefits $629,983,243 $10,692,528 $6,572,445 $481,560,733 $63,983,282 $67,174,255 ============ =========== ========== ============ =========== ===========
See accompanying notes to financial statements 5 KELLOGG COMPANY 3 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION OCTOBER 31, 1995
FIXED COMPANY LOAN BOND INCOME EQUITY STOCK TOTAL FUND FUND FUND FUND FUND ASSETS: Receivables: Employer contributions $ 484,554 $ - $ 6,010 $ 283,613 $ 34,636 $ 160,295 Interest 415 415 ------------ ----------- ---------- ------------ ----------- ----------- Total receivables 484,969 6,010 284,028 34,636 160,295 ------------ ----------- ---------- ------------ ----------- ----------- Investments: Plan's interest in Master Trust 123,586,199 4,876,840 29,690,301 89,019,058 Interfund borrowings (922,676) 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 30,612,977 89,019,058 ------------ ----------- ---------- ------------ ----------- ----------- Assets available for benefits $680,852,983 $14,631,203 $4,882,850 $541,511,964 $30,647,613 $89,179,353 ============ =========== ========== ============ =========== ===========
See accompanying notes to financial statements 6 KELLOGG COMPANY 4 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION FOR THE YEAR ENDED OCTOBER 31, 1996
FIXED COMPANY LOAN BOND INCOME EQUITY STOCK TOTAL FUND FUND FUND FUND FUND Contributions: Employer $ 6,643,589 $ - $ 100,981 $ 3,723,157 $ 787,452 $ 2,031,999 Employee 16,411,046 275,076 10,182,593 2,440,596 3,512,781 Loans repaid (5,577,494) 109,771 3,376,738 858,091 1,232,894 Rollover from other qualified plans 38,482 37,680 802 ------------- ----------- ---------- ------------ ----------- ------------ Total contributions 23,093,117 (5,577,494) 485,828 17,320,168 4,086,139 6,778,476 ------------- ----------- ---------- ------------ ----------- ------------ Earnings on Investments: Plan's interest in income of Master Trust 2,965,475 270,576 (1,587) 10,087,708 (7,391,222) Interest income 36,025,322 1,086,360 34,938,962 Investment services fees (70,588) (555) (56,763) (3,558) (9,712) Trustee fees (15,492) (15,492) ------------- ----------- ---------- ------------ ----------- ------------ Total earnings on investments, net 38,904,717 1,086,360 270,021 34,865,120 10,084,150 (7,400,934) ------------- ----------- ---------- ------------ ----------- ------------ Net transfers between funds 1,862,524 (15,714,715) 26,992,837 (13,140,646) Participant withdrawals (112,865,444) (2,653,632) (843,331) (94,475,192) (7,387,039) (7,506,250) New loan distributions 3,206,091 (85,447) (1,946,254) (439,240) (735,150) Net transfers between Plans (2,130) (358) (1,178) (594) ------------- ----------- ---------- ------------ ----------- ------------ Net increase (decrease) (50,869,740) (3,938,675) 1,689,595 (59,951,231) 33,335,669 (22,005,098) Assets available for benefits at beginning of year 680,852,983 14,631,203 4,882,850 541,511,964 30,647,613 89,179,353 ------------- ----------- ---------- ------------ ----------- ------------ Assets available for benefits at end of year $629,983,243 $10,692,528 $6,572,445 $481,560,733 $63,983,282 $67,174,255 ============= =========== ========== ============ =========== ============
See accompanying notes to financial statements 7 KELLOGG COMPANY 5 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION FOR THE YEAR ENDED OCTOBER 31, 1995
FIXED COMPANY LOAN BOND INCOME EQUITY STOCK TOTAL FUND FUND FUND FUND FUND Contributions: Employer $ 6,893,623 $ - $ 78,020 $ 4,219,403 $ 400,769 $ 2,195,431 Employee 16,817,030 199,446 11,635,400 1,129,922 3,852,262 Loans repaid (3,829,688) 89,769 2,382,599 328,542 1,028,778 Rollover from other qualified plans 5,102 1,425 3,677 ------------ ----------- ---------- ------------ ----------- ------------ Total contributions 23,715,755 (3,829,688) 367,235 18,238,827 1,859,233 7,080,148 ------------ ----------- ---------- ------------ ----------- ------------ Earnings on Investments: Plan's interest in income of Master Trust 27,550,917 631,411 284,531 5,912,260 20,722,715 Interest income 37,979,201 1,069,706 36,909,495 Investment services fees (61,871) (435) (49,178) (2,195) (10,063) Trustee fees (62,448) (320) (55,763) (1,775) (4,590) ------------ ----------- ---------- ------------ ----------- ------------ Total earnings on investments, net 65,405,799 1,069,706 630,656 37,089,085 5,908,290 20,708,062 ------------ ----------- ---------- ------------ ----------- ------------ Net transfers between funds 35,792 37,887,631 2,943,455 (40,866,878) Participant withdrawals (32,892,681) (153,086) (214,006) (29,598,875) (645,332) (2,281,382) New loan distributions 6,981,921 (62,966) (4,476,880) (552,925) (1,889,150) Net transfers between Plans (15,331) (4,746) (7,228) (1,341) (2,016) ------------ ----------- ---------- ------------ ----------- ------------ Net increase (decrease) 56,213,542 4,068,853 751,965 59,132,560 9,511,380 (17,251,216) Assets available for benefits at beginning of year 624,639,441 10,562,350 4,130,885 482,379,404 21,136,233 106,430,569 ------------ ----------- ---------- ------------ ----------- ------------ Assets available for benefits at end of year $680,852,983 $14,631,203 $4,882,850 $541,511,964 $30,647,613 $89,179,353 ============ =========== ========== ============ =========== ============
See accompanying notes to financial statements 8 KELLOGG COMPANY 6 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, 1996 or 1995:
INTEREST OCTOBER 31, DESCRIPTION RATE 1996 1995 Brundage, Story & Rose Managed Synthetic GIC Fund Variable $51,000,246 $52,042,315 Putnam Horizon Managed Synthetic GIC Fund Variable 54,897,596 51,877,407 Morgan Bank GIC #41 9.37% - 79,004,435 Allstate Life Ins. GAC #5686A 8.13% 46,308,672 42,826,850 John Hancock GAC #5919-10001 8.82% 71,360,224 99,791,611 John Hancock GAC #7605 7.87% 46,775,286 43,362,646 Metropolitan Life GIC 6.27% 34,863,169 17,648,727 New York Life GAC #3032100 6.72% 40,704,874 - Plan's Interest in Master Trust Variable 138,574,423 123,586,199
ALLOCATION OF NET INVESTMENT INCOME TO PARTICIPANTS Net investment income related to the respective investment options 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 7 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 constant rate equal to one percent over the prime rate in the month the loan begins. Principal and interest are paid ratably through monthly payroll deductions. Loans that are considered to be uncollectible at year end result in the outstanding principal being considered a hardship withdrawal from the participant's plan account. 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 8 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 at October 31, 1996 and 1995 and the changes in assets for the periods then ended are as follows: 11 KELLOGG COMPANY 9 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS 4. MASTER TRUST (CONTINUED) KELLOGG COMPANY MASTER TRUST SCHEDULE OF ASSETS AND LIABILITIES FOR MASTER TRUST INVESTMENT ACCOUNTS
Pension Plans Savings & Investment Plans Total 10/31/95 10/31/96 10/31/95 10/31/96 10/31/95 10/31/96 ---------------------------- --------------------------- ---------------------------- CASH/EQUIVALENTS: Non-Interest Bearing $217,156 $1,316 $21,959 $431 $239,115 $1,747 Interest Bearing Cash $3,233,903 $2,771,776 $0 $0 $3,233,903 $2,771,776 ---------------------------- --------------------------- --------------------------- TOTAL CASH/EQUIVALENTS $3,451,059 $2,773,092 $21,959 $431 $3,473,018 $2,773,523 ---------------------------- --------------------------- --------------------------- RECEIVABLES $43,951,125 $60,900,475 $197,607 $274,793 $44,148,732 $61,175,268 ---------------------------- --------------------------- --------------------------- GENERAL INVESTMENTS: Long Term U.S. Gov't Securities $39,730,104 $50,267,438 $8,478,055 $7,389,825 $48,208,159 $57,657,263 Short Term U.S. Gov't Securities $0 $0 $470,954 $402,416 $470,954 $402,416 Corporate Debt - Long Term $11,602,092 $14,301,477 $2,148,889 $7,648,217 $13,750,981 $21,949,694 Corporate Debt - Short Term $820,221 $0 $225,136 $25,139 $1,045,357 $25,139 Corporate Stocks - Preferred $1,250,342 $1,838,037 $0 $0 $1,250,342 $1,838,037 Corporate Stocks - Convertible $2,821,724 $5,419,318 $0 $0 $2,821,724 $5,419,318 Corporate Stocks - Common $419,250,631 $477,113,443 $209,608,570 $252,507,733 $628,859,201 $729,621,176 Real Estate Pooled Funds $19,350,020 $17,810,044 $0 $0 $19,350,020 $17,810,044 Value of Interest in Pooled Funds $2,025,248 $8,948,629 $445,059 $333,995 $2,470,307 $9,282,624 Guaranteed Investment Contracts $53,760,024 $68,035,400 $0 $0 $53,760,024 $68,035,400 ---------------------------- --------------------------- --------------------------- TOTAL INVESTMENTS $550,610,406 $643,733,786 $221,376,663 $268,307,325 $771,987,069 $912,041,111 ---------------------------- --------------------------- --------------------------- TOTAL ASSETS $598,012,590 $707,407,353 $221,596,229 $268,582,549 $819,608,819 $975,989,902 ---------------------------- --------------------------- --------------------------- PAYABLES ($41,486,770) ($62,117,871) $0 $0 ($41,486,770) ($62,117,871) ---------------------------- --------------------------- --------------------------- TOTAL LIABILITIES ($41,486,770) ($62,117,871) $0 $0 ($41,486,770) ($62,117,871) ---------------------------- --------------------------- --------------------------- NET ASSETS $556,525,820 $645,289,482 $221,596,229 $268,582,549 $778,122,049 $913,872,031 ============================ =========================== =========================== Percentage Interest held by the Plan 0.0% 0.0% 55.8% 51.6% 15.9% 15.2%
12 KELLOGG COMPANY 10 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS 4. MASTER TRUST (CONTINUED) KELLOGG COMPANY MASTER TRUST SCHEDULE OF INCOME AND EXPENSES, CHANGES IN NET ASSETS AND NET INCREASE (DECREASE) IN NET ASSETS OF MASTER TRUST INVESTMENT ACCOUNTS
Pension Plans Savings & Investment Plans Total 10/31/95 10/31/96 10/31/95 10/31/96 10/31/95 10/31/96 ----------------------------- ------------------------------- ------------------------------ Transfer of Assets Into Investment Account $39,000,063 $60,000,541 $270,373,840 $471,493,020 $309,373,903 $531,493,561 Earnings on Investments Interest $11,111,429 $7,804,578 $1,341,964 $1,153,223 $12,453,393 $8,957,801 Dividends $3,457,702 $2,789,517 $3,259,625 $2,829,397 $6,717,327 $5,618,914 Corporate Actions $6,150 $1,597,268 $0 $0 $6,150 $1,597,268 Pooled Fund Distributions $1,824,378 $4,177,043 $0 $0 $1,824,378 $4,177,043 Miscellaneous $661 $125 $0 $0 $661 $125 Net Realized Gain/(Loss) $7,153,214 $26,178,076 $9,849,022 $18,018,388 $17,002,236 $44,196,464 ----------------------------- ------------------------------- ------------------------------ TOTAL ADDITIONS $62,553,597 $102,547,148 $284,824,451 $493,494,028 $347,378,048 $596,041,176 ----------------------------- ------------------------------- ------------------------------ Transfer of Assets Out of Investment Account ($9,692,814) ($38,227,387) ($325,217,232) ($437,982,138) ($334,910,046) ($476,209,525) Fees and Commissions ($1,036,664) ($1,487,578) ($32,385) ($58,996) ($1,069,049) ($1,546,574) ----------------------------- ------------------------------- ------------------------------ TOTAL DISTRIBUTIONS ($10,729,478) ($39,714,965) ($325,249,617) ($438,041,134) ($335,979,095) ($477,756,099) ----------------------------- ------------------------------- ------------------------------ Change in Unrealized Appreciation $51,175,245 $25,931,479 $34,283,639 ($8,466,574) $85,458,884 $17,464,905 ----------------------------- ------------------------------ ------------------------------ NET CHANGE IN ASSETS $102,999,364 $88,763,662 ($6,141,527) $46,986,320 $96,857,837 $135,749,982 Net Assets at Beginning of Year $453,526,456 $556,525,820 $227,737,756 $221,596,229 $681,264,212 $778,122,049 ----------------------------- ------------------------------- ------------------------------ Net Assets at End of Year $556,525,820 $645,289,482 $221,596,229 $268,582,549 $778,122,049 $913,872,031 ============================= =============================== ==============================
13 KELLOGG COMPANY 11 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES - OCTOBER 31, 1996
MARKET UNREALIZED SECURITY DESCRIPTION COST PRICE VALUE GAIN/LOSS TBC, Inc. Pooled Employee Funds Daily Liquidity Fund $ 7,304,194 1.00 $ 7,304,194 $ - Loans to participants 10,692,528 1.00 10,692,528 Brundage Story & Rose Managed Synthetic GIC Fund Variable Rate 51,000,246 1.00 51,000,246 John Hancock GAC #5919-10001 8.82% 6/1/97 71,360,224 1.00 71,360,224 Protective Life Ins. GIC #807-B 6.08% 1/31/97 10,256,570 1.00 10,256,570 Provident Life GIC #627-05439-01A 6.24% 6/30/97 17,742,908 1.00 17,742,908 Putnam Horizon Managed Synthetic GIC Variable Rate 6/1/99 54,897,596 1.00 54,897,596 Principal Mutual GAC #4-12130-01 5.30% 12/1/98 19,867,729 1.00 19,867,729 Peoples Security Ins #BDA00378FR 5.15% 12/1/97 19,402,973 1.00 19,402,973 Allstate Life Ins. GAC #5686A 8.13% 12/1/98 46,308,672 1.00 46,308,672 Commonwealth Life #ADA00687FR 7.54% 6/1/98 29,814,742 1.00 29,814,742 John Hancock GAC #7605 7.87% 12/1/98 46,775,286 1.00 46,775,286 Commonwealth Life GIC 6.19% 6/1/98 13,826,157 1.00 13,826,157 Metropolitan Life GIC 6.27% 6/1/99 34,863,169 1.00 34,863,169 New York Life GIC 6.20% 6/1/98 15,969,405 1.00 15,969,405 New York Life GAC #30321002 6.72% 6/1/00 40,704,874 1.00 40,704,874 ------------ ------------ ---------- $490,787,273 $490,787,273 $ - ============ ============ ==========
14 KELLOGG COMPANY 12 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Lurener M. Harris $ 1,100 $ 16 $ 12 $ 907 08/31/94 8.3% 08/31/99 $ 907 $ 6 P.O. Box 532 908 N. Clinton Albion, MI 49224 Vicki L. Goodman 6,737 5,126 548 1,611 12/31/94 9.5% 12/31/99 1,611 115 115 W. Orange Street Lititz, PA 17543 Mary A. Richmond 15,000 1,386 549 11,087 09/30/94 8.8% 09/30/99 11,087 404 350 Sun Valley Drive Leola, PA 17450 W.L. Spivey 4,000 1,248 130 1,338 12/31/94 9.5% 12/31/96 1,338 42 5320 Peach Trail Southhaven, MS 38671 Jim F. Height 17,000 2,605 1,080 12,047 11/30/94 8.8% 11/30/99 12,047 88 P.O. Box 721 Battle Creek, MI 49016 Margueritte Miller 3,940 76 45 1 08/31/94 8.3% 08/31/99 1 - 60 Illinois Battle Creek, MI 49017
15 KELLOGG COMPANY 13 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Kenneth A. Dunbar $ 5,000 $ 706 $ 187 $ 3,581 08/31/94 8.3% 08/31/99 $ 3,581 $123 393 N. Kendall Street Battle Creek, MI 49017 Gregory J. Miller 4,823 103 179 4,398 08/31/94 8.3% 08/31/99 4,398 182 42 N. 22nd Street Battle Creek, MI 49015 Marshall D. Parsons 25,000 3,518 1,794 19,499 03/31/95 10.0% 03/31/00 19,499 325 145 S. Wattles Road Battle Creek, 49017 Shelly R. Wilson 2,900 96 54 2,332 10/31/94 8.8% 10/31/99 2,332 153 140 N. 32nd Street Battle Creek, MI 49015 Edwin J. Skinner 1,500 43 19 1,273 11/30/94 8.8% 11/30/99 1,273 93 1455 103rd Oakland, CA 94603 Jarittie J. McGuire, Jr. 25,000 4,097 1,293 16,608 08/31/94 8.3% 08/31/99 4,097 - P.O. Box 2243 Battle Creek, MI 49016
16 KELLOGG COMPANY 14 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Steven K. Perry $12,079 $ 903 $329 $ 8,961 08/31/94 8.3% 08/31/99 $ 8,961 $432 3280 Academy Boulevard Lot 247 Colorado Springs, CO 80916 Arniece Smith-Bell 8,000 5,846 369 198 11/30/94 8.8% 11/30/97 198 1 54 S. McKinley Battle Creek, MI 49017 Russell E. Upston 3,200 110 77 2,947 06/30/95 10.0% 06/30/00 2,947 147 11601 22 Mile Road Marshall, MI 49068 Ronald W. Price 11,000 524 352 10,188 07/31/95 10.0% 07/31/00 10,188 509 881 N. Wattles Road Battle Creek, MI 49017 Brenda K. Begg 14,000 1,260 453 10,172 08/31/94 8.3% 08/31/99 10,172 420 748 E. Prospect Marshall, MI 49068 Cindy L. Evans 6,195 823 59 2,179 08/31/94 8.3% 08/31/96 2,179 90 112 Cliff Street Battle Creek, MI 49017
17 KELLOGG COMPANY 15 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Eileen J. Moore $12,000 $10,421 $748 $ 128 10/31/94 8.8% 10/31/99 $ 128 $ - 8024 E. Drive North Battle Creek, MI 49017 Kelly R. Brophy 7,500 - - 6,611 11/30/94 8.8% 11/30/99 6,611 413 319 Country Club Boulevard Battle Creek, MI 49015 Bettie C. Frantz 23,696 - 212 19,702 08/31/94 8.3% 08/31/99 19,702 1,490 2635 DR Drive South East Leroy, MI 49051 Thelma Williams 20,646 985 380 15,942 08/31/94 8.3% 08/31/99 15,942 658 168 Foote Road Battle Creek, MI 49017 Frank Jarman, Jr. 9,500 1,066 274 5,975 08/31/94 8.2% 08/31/98 5,975 123 56 Brown Drive Battle Creek, MI 49017 Brenda R. Towery 4,400 206 94 3,850 02/28/95 9.5% 02/28/00 3,850 275 297 Silver Battle Creek, MI 49017
18 KELLOGG COMPANY 16 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Gerrie A. Petch $ 4,450 $ 4,414 $ 275 $ 36 11/30/95 9.8% 11/30/00 $ 35 $ - 22275 14 Mile Road Bellevue, MI 49021 Ella M. Quarles 3,500 335 86 2,442 01/31/95 9.5% 01/31/98 2,442 116 116 Winding Way Battle Creek, MI 49015 Gary A. Bristol 15,000 721 474 13,689 06/30/95 10.0% 06/30/00 13,689 1,113 1653 Pifer Road Delton, MI 49046 Duane L. Robinson 17,000 15,409 1,219 160 01/31/95 9.5% 01/31/00 160 - 9995 6 1/2 Mile Road Ceresco, MI 49033 William W. Trinklein 14,000 1,415 355 10,272 02/28/95 9.5% 02/28/98 10,272 651 6178 Ormada Kalamazoo, MI 49004 Patrick W. Dougherty 15,000 1,427 485 10,975 08/31/94 8.3% 08/31/99 10,975 302 287 S. Wattles Road Battle Creek, MI 49017
19 KELLOGG COMPANY 17 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Robert A. Cook $22,000 $ 3,238 $1,137 $14,727 08/31/94 8.3% 08/31/99 $14,727 $ 202 7990 S. 43rd Street Scotts, MI 49088 Roger D. Albright 30,000 21,928 681 2,263 08/31/94 8.3% 08/31/99 2,263 93 580 Farrand Road Sherwood, MI 49089 Kenneth J. Miles 5,000 709 235 3,374 08/31/94 8.3% 08/31/99 3,374 - 15011 W. Michigan Avenue Lot 13 Marshall, MI 49068 Ruth E. VanDyke 26,000 1,130 480 21,039 10/31/94 8.8% 10/31/99 21,039 1,074 116 Wanondoger Trail Battle Creek, MI 49017 Rose M. Miles 20,000 3,380 581 11,680 10/31/94 8.8% 10/31/97 11,680 426 4283 Mt. Hood #7 Memphis, TN 38118 David J. Coffing 50,000 1,673 1,103 39,382 08/31/94 8.3% 08/31/99 39,382 1,896 515 N. Park Street Union City, MI 49094 Mary J. Alexander 12,600 1,867 651 8,499 08/31/94 8.3% 08/31/99 8,499 117 68 Lathrop Battle Creek, MI 49017
20 KELLOGG COMPANY 18 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Morton Hawkins $10,000 $1,244 $510 $ 7,087 09/30/94 8.8% 09/30/99 $ 7,087 $ 155 15 Eagle Street Battle Creek, MI 49017 Kerryn S. Schira 12,000 966 187 8,675 08/31/94 8.3% 08/31/98 8,675 358 585 Fairfield Battle Creek, MI 49015 Thomas L. Conant 7,000 775 296 4,941 08/31/94 8.3% 08/31/99 4,941 136 204 W. Mill Street Athens, MI 49011 Norman D. Dudley, Jr. 50,000 144 649 48,651 08/31/94 8.3% 08/31/99 48,651 2,007 2787 E. Oak Lane Layton, UT 84040 Jeffrey W. Wilson 8,500 1,331 599 6,189 12/31/94 9.5% 12/31/99 6,189 - 149 Moonwood Trail Battle Creek, MI 49017 Rick J. Labrecque 10,000 9,131 863 636 08/31/94 8.3% 08/31/99 636 22 100 Minges Creek Place Battle Creek, MI 49015
21 KELLOGG COMPANY 19 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Sally A. Farrington $15,000 $ 473 $ 251 $11,735 08/31/94 8.3% 08/31/99 $11,735 $ 565 92 East Avenue North Battle Creek, MI 49017 Robert G. Orns 30,000 2,847 971 21,956 08/31/94 8.3% 08/31/99 21,956 906 7541 12 Mile Road Burlington, MI 49029 Richard B. Whitfield 6,500 652 243 4,656 08/31/94 8.2% 08/31/99 4,656 96 508 Haven Road Albion, MI 49224 Jerry A. Ure 25,000 - 66 24,234 09/30/94 8.8% 09/30/99 24,234 1,591 289 Oak Lawn Drive Battle Creek, MI 49017 Jon D. Robnolt 30,000 440 172 24,504 08/31/94 8.3% 08/31/99 24,504 1,685 1773 Lakeside Drive Ceresco, MI 49033 Cynthia L. Ackley 9,091 1,435 609 6,936 02/28/95 9.5% 02/28/00 6,936 - 204 Electric Avenue Battle Creek, MI 49017
22 KELLOGG COMPANY 20 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Keith L. Fitzpatrick $ 9,744 $ 630 $ 215 $ 7,476 08/31/94 8.3% 08/31/99 $ 7,476 $411 310 Cornell Battle Creek, MI 49017 William L. Brenner 25,000 1,613 681 18,547 08/31/94 8.3% 08/31/99 18,547 893 11657 3 1/2 Mile Road Battle Creek, MI 49017 James A. Newman 2,000 213 76 1,467 12/31/94 9.5% 12/31/98 1,467 70 314 N. 20th Street Battle Creek, MI 49015 Lawrence E. Lawyer 40,000 3,605 1,494 29,059 08/31/94 8.3% 08/31/99 29,059 599 10450 6 Mile Road, Lot 280 Battle Creek, MI 49017 Fred J. Sebright 16,000 793 268 12,354 08/31/94 8.3% 08/31/99 12,354 595 127 S. Stone Battle Creek, MI 49017 Marie L. Southern 4,600 628 216 3,152 08/31/94 8.3% 08/31/99 3,152 65 182 N. Wabash Battle Creek, MI 49107
23 KELLOGG COMPANY 21 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Dawn E. Quada $ 1,480 $ 124 $ 10 $ 634 08/31/94 8.3% 08/31/96 $ 634 $ 44 19278 Homer Road Marshall, MI 49068 Rick Allen Frey 4,559 68 101 3,819 10/31/94 8.8% 10/31/99 3,819 195 8192 Bird Road Hastings, MI 49058 Boyd M. Crannell 20,000 16,922 396 1 12/31/94 9.5% 12/31/98 1 - 6219 Butterfield Highway Bellevue, MI 49021 William H. Richardson 35,000 2,646 1,133 25,935 08/31/94 8.3% 08/31/99 25,935 892 25 Convis Street, Apt. 37 Battle Creek, MI 49017 Jeffrey A. Starring 7,000 - - 6,805 10/31/94 8.8% 10/31/99 6,805 99 506 Eldred Battle Creek, MI 49015 David R. Curtis 13,500 1,412 437 10,008 08/31/94 8.3% 08/31/99 10,008 413 3850 Andrus Road Hastings, MI 49058
24 KELLOGG COMPANY 22 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST William H. Hubbard $14,000 $ 553 $ 243 $11,022 08/31/94 8.3% 08/31/99 $11,022 531 201 Shellenberger Avenue Battle Creek, MI 49017 David R. Kidder 14,000 68 74 13,625 08/31/94 8.3% 08/31/99 13,625 187 10450 6 Mile Road Lot 232 Battle Creek, MI 49017 Robert W. Fales 7,000 6,733 577 100 08/31/95 9.8% 08/31/00 100 - 202 Indian Road Battle Creek, MI 49017 Kenneth M. Lewandowski 12,000 375 183 9,649 10/31/94 8.8% 10/31/99 9,649 422 79 Winter Street Battle Creek, MI 49015 Rusty A. Herwarth 16,400 702 275 12,774 08/31/94 8.3% 08/31/99 12,774 791 10741 L. Drive North Battle Creek, MI 49017 Donald M. Nelson 50,000 4,438 1,753 37,215 09/30/94 8.8% 09/30/99 37,215 1,086 4998 F Drive S East Leroy, MI 49051
25 KELLOGG COMPANY 23 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Eugene R. Weeks $20,000 $14,118 $772 $516 11/30/94 8.8% 11/30/97 $516 $15 251 Main East Leroy, MI 49051 Paul E. Coats 50,000 4,438 1,753 37,215 09/30/94 8.8% 09/30/99 37,215 1,628 20445 14 Mile Road Battle Creek, MI 49017 Jeanette R. Willard 3,500 650 58 1,214 09/30/94 8.8% 09/30/96 1,214 26 232 S. Lavista Boulevard Battle Creek, MI 49015 Michael M. Campbell 35,000 1,817 545 24,801 08/31/94 8.3% 08/31/98 24,801 1,194 7441 - 3 1/2 Mile Road East Leroy, MI 49051 Bertha K. Brazie 50,000 6,593 2,585 33,981 08/31/94 8.3% 08/31/99 33,981 467 14 Jericho Road Battle Creek, MI 49014 Vanessa A. Scott 7,700 679 275 5,887 10/31/94 8.8% 10/31/99 5,887 215 729 North Avenue Battle Creek, MI 49017
26 KELLOGG COMPANY 24 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Loretta S. Trewhalla $15,000 $1,757 $874 $10,938 11/30/94 8.8% 11/30/99 $10,938 $ - 144 Heather Marshall, MI 49068 Thomas K. Allen 10,295 - - 9,138 08/31/94 8.3% 08/31/99 9,138 503 450 Orleans Battle Creek, MI 49015 Dennis D. McKinley 5,500 76 55 5,351 03/31/95 10.0% 03/31/00 5,351 268 95 Greenwood Battle Creek, MI 49017 Gail D. Campbell 3,000 193 178 2,481 09/30/94 8.8% 09/30/99 2,481 72 303 Redner Avenue Battle Creek, MI 49017 Barbara A. Bowen 18,300 1,274 499 13,670 08/31/94 8.3% 08/31/99 13,670 658 22100 Struwin Road Battle Creek, MI 49017 Phyllis J. Russell 15,000 518 170 229 08/31/94 8.3% 08/31/99 229 13 15700 Mann Road Nashville, MI 49073
27 KELLOGG COMPANY 25 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Louise P. Perry $2,000 $47 $49 $1,879 07/31/95 10.0% 07/31/00 $1,879 $141 50 West Pitman Battle Creek, MI 49017 Joann Hill 30,500 1,013 511 24,204 08/31/94 8.3% 08/31/99 24,204 1,332 74 Keith Drive Battle Creek, MI 49017 David L. Farmer 5,000 165 71 4,419 01/31/95 9.5% 01/31/00 4,419 280 2563 Hickory Road Battle Creek, MI 49017 Richard A. Ray 38,000 3,425 1,420 27,218 08/31/94 8.3% 08/31/99 27,218 936 4207 W. Dickman Road, Apt. 1A Battle Creek, MI 49017 David R. Lewis 3,980 273 117 3,064 09/30/94 8.8% 09/30/99 3,064 22 61 Boyd Street Battle Creek, MI 49017 Donald K. Ivens 3,500 531 173 2,409 12/31/94 9.5% 12/31/98 2,409 76 184 N. Gardner Avenue Battle Creek, MI 49017
28 KELLOGG COMPANY 26 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Anna L. Butler $10,000 $393 $167 $7,823 08/31/94 8.3% 08/31/99 $7,823 $376 P.O. Box 521 Battle Creek, MI 49016 Richard L. Nava 21,000 763 450 18,262 02/28/95 9.5% 02/28/00 18,262 1,012 54 Wren Street Battle Creek, MI 49017 Terry A. Vanvleet 17,000 618 364 14,784 02/28/95 9.5% 02/28/00 14,784 1,053 10450 6 Mile Road, Lot 254 Hickory Hills Battle Creek, MI 49017 Suzanne E. Bamfield 5,000 283 89 3,813 11/30/94 8.8% 11/30/98 3,813 195 14800 Banfield Road Battle Creek, MI 49017 Donald Shipley 20,000 1,089 441 15,243 08/31/94 8.3% 08/31/99 15,243 839 7710 Day Road Bellevue, MI 49021 Patricia A. McCleary 50,000 2,088 884 40,283 08/31/94 8.3% 08/31/99 40,283 1,662 8164 Reynolds Road Bellevue, MI 49021
29 KELLOGG COMPANY 27 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Carole S. Kidder $4,500 $14 $25 $4,074 08/31/94 8.3% 08/31/99 $4,074 $370 10450 6 Mile Road, Lot 232 Battle Creek, MI 49017 Larry K. Noga 7,800 244 233 6,860 08/31/94 8.3% 08/31/99 6,860 378 P.O. Box 53 Ceresco, MI 49033 Catherine L. Kline 2,500 10 16 2,261 10/31/94 8.8% 10/31/99 2,261 165 343 Pine Knoll Drive, Apt. 1B Battle Creek, MI 49017 Edward H. Rigel 3,500 351 131 2,507 08/31/94 8.3% 08/31/99 2,507 86 259 N. Wheatfield Drive Sherwood, MI 49089 Barbara J. Cotton 25,000 3,086 1,300 18,102 10/31/94 8.8% 12/31/99 18,102 396 5572 I Drive South East Leroy, MI 49051 Susan J. Hopkins 12,000 - 86 11,442 12/31/94 9.5% 12/31/98 11,442 906 330 E. Sunset Boulevard Battle Creek, MI 49017
30 KELLOGG COMPANY 28 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Jayne A. Orns $14,700 $1,323 $476 $10,681 08/31/94 8.3% 08/31/99 $10,681 $73 14200 - 18 1/2 Mile Road Marshall, MI 49068 Barbara Thompson 4,000 318 98 2,855 01/31/95 9.5% 01/31/98 2,855 181 104 Sundown Springfield, MI 49015 Linda J. Fish 20,000 1,497 919 18,503 01/31/96 9.5% 01/31/01 18,503 293 4224 Watkins Road Battle Creek, MII 49017 Gary L. Gunberg 6,000 352 143 4,646 09/30/94 8.8% 09/30/99 4,646 271 737 Calico Portage, MI 49002 Ronald S. Niebauer 25,000 5,812 872 10,853 08/31/94 8.3% 08/31/97 10,853 75 1241 Clear Lake Dowling, MI 49050 Roger N. Coult 25,000 737 283 20,050 08/31/94 8.3% 08/31/99 20,050 1,241 10450 6 Mile Road, Lot 221 Battle Creek, MI 49017
31 KELLOGG COMPANY 29 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Johnny A. Suggs $25,000 $815 $283 $20,050 08/31/94 8.3% 08/31/99 $20,050 $1,379 818 Pinewood Battle Creek, MI 49017 Beverly A. Olds 21,500 4,956 1,897 14,297 08/31/94 8.3% 08/31/99 14,297 - P.O. Box 828 Battle Creek, MI 49016 Johnnie M. Brown 25,000 3,947 1,407 16,467 08/31/94 8.3% 08/31/99 16,647 - 17 Gladys Court Portage, MI 49081 Dennis E. Buchanan 27,000 4,028 1,544 18,855 10/31/94 8.8% 10/31/99 18,855 275 P.O. Box 1202 Battle Creek, MI 49016 Carol A. Icard 40,000 3,264 1,294 29,399 08/31/94 8.3% 08/31/99 29,399 809 12060 11 Mile Road Ceresco, MI 49033 Judith A. Brown 5,000 4,682 429 43 03/31/95 10.0% 03/31/00 43 - 8261 Swift Road Battle Creek, MI 49017
32 KELLOGG COMPANY 30 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Ervin R. Babcock $31,299 $26,976 $774 $161 11/30/94 8.8% 11/30/99 $161 $7 11200 Banfield Road Delton, MI 49046 George W. Burrows 40,000 580 229 32,679 08/31/94 8.3% 08/31/99 32,679 2,247 605 Golden Avenue Nashville, MI 49073 Shirley A. Case 27,000 472 385 24,004 01/31/95 9.5% 01/31/00 24,004 1,521 435 Cooper Street Battle Creek, MI 49015 Tyrone G. Edgerton 50,000 1,609 837 39,221 08/31/94 8.3% 08/31/99 39,221 2,427 P.O. Box 8 Bedford, MI 49020 Carol A. Dennison 10,000 352 232 9,043 04/30/95 10.0% 04/30/00 9,043 528 28 S. Cedar Battle Creek, MI 49017 Linda S. Cooper 1,600 181 55 1,016 08/31/94 8.3% 08/31/98 1,016 21 5564 E. Halbert Battle Creek, MI 49017
33 KELLOGG COMPANY 31 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Patricia E. Blaskie $13,800 $1,244 $516 $10,025 08/31/94 8.3% 08/31/99 $10,025 $207 22100 Struwin Battle Creek, MI 49017 Jamie L. Todd 15,500 1,150 635 12,679 01/31/95 9.5% 01/31/00 12,679 502 13194 11 Mile Road Ceresco, MI 49033 Daniel L. Savage 2,000 246 22 837 09/30/94 8.8% 09/30/96 837 55 P.O. Box 75 Bedford, MI 49020 Richard G. Robinson 20,000 192 114 16,438 08/31/84 8.3% 08/31/99 16,438 1,131 83 Lathrop Street Battle Creek, MI 49017 Henry C. Garbe 10,000 286 127 8,477 11/30/94 8.8% 11/30/99 8,477 619 19000 Mines road Livermore, CA 94550 Katharine R. Noble 1,351 291 89 1,060 11/30/95 9.8% 11/30/98 1,060 9 6982 Juanita Circle, S. Memphis, TN 38133
34 KELLOGG COMPANY 32 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST William Hayes $15,000 $514 $251 $11,735 08/31/94 8.3% 08/31/99 $11,735 $565 470 Shofner Avenue Memphis, TN 38122 Larry E. Quinn, Sr. 17,000 1,384 550 12,498 08/31/94 8.3% 08/31/99 12,498 516 3632 Horn Lake Memphis, TN 38109 Crystal D. Ballard 1,053 154 8 496 03/31/95 10.1% 03/31/96 496 37 4819 Winchester Road Memphis, TN 38118 Carlean Ryan 13,000 383 214 10,233 08/31/94 8.3% 08/31/99 10,233 281 2154 Alcy Road Memphis, TN 38114 Shirlee M. Cardwell 15,000 38 120 14,962 08/31/95 9.8% 08/31/00 14,962 851 3048 Queensgate Memphis, TN 38118 Robert J. Broom 16,000 792 353 12,276 08/31/94 8.3% 08/31/99 12,276 253 3291 Brookmead Street Memphis, TN 38127
35 KELLOGG COMPANY 33 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Margie M. Dowery $25,000 $1,111 $419 $19,803 08/31/94 8.3% 08/31/99 $19,803 $953 1451 Haverwood Avenue Memphis, TN 38116 Luther Clayton 25,000 3,239 1,276 17,588 09/30/94 8.8% 09/30/99 17,588 257 3407 Berea Memphis, TN 38109 Charles B. Fisher 2,000 49 29 1,788 02/28/95 9.5% 02/28/00 1,788 142 4758 Fair Avenue Oakland, CA 94619 James E. Brown 24,000 - - 23,669 08/31/94 8.3% 08/31/99 23,669 - 4472 Tracy Lynn Memphis, TN 38125 Teresa L. Young 7,500 5,971 464 304 08/31/94 8.3% 08/31/99 304 - 1001 Sheridan Memphis, TN 38107 Sharilyn Mathena 1,661 14 13 1,607 10/31/95 9.8% 10/31/98 1,607 118 5181 Brushwood Memphis, TN 38109
36 KELLOGG COMPANY 34 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Robert L. Mayweather $50,000 $6,827 $2,351 $34,002 08/31/94 8.3% 08/31/99 $34,002 $ - 1895 Fairmeade Memphis, TN 38114 J.D. Walker 40,000 1,973 882 30,690 08/31/94 8.3% 08/31/99 30,690 1,266 4588 White Fox Memphis, TN 38109 Marcellus Martin 50,000 6,317 2,351 34,512 08/31/94 8.3% 08/31/99 34,512 237 3564 Dalebranch #1 Memphis, TN 38116 Dorothy B. Lewis 40,000 6,176 2,492 27,724 10/31/94 8.8% 10/31/99 27,724 202 5025 Whitworth Nesbit, MS 38651 Hazel L. Ivy 10,000 2,768 378 3,898 08/31/94 8.3% 08/31/97 3,898 - 4932 N. 52nd Street Omaha, NE 68104 Gwendolyn G. Glover 32,000 1,347 1,020 30,653 11/30/95 9.8% 11/30/00 30,653 996 4616 Tulane Memphis, TN 38109
37 KELLOGG COMPANY 35 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Beverly V. Shelton $1,000 $68 $13 $740 03/31/95 10.0% 03/31/97 $740 $56 3030 Estes Street Memphis, TN 38115 Charles M. Phillips, Jr. 45,000 2,370 1,112 36,414 11/30/94 8.8% 11/30/99 36,414 1,593 4957 Parkside Avenue Memphis, TN 38117 Steve Ballard 50,000 6,572 2,351 34,257 08/31/94 8.3% 08/31/99 34,257 236 4598 Tulane Road Memphis, TN 38019 Betty C. Ferrell 6,000 876 462 4,680 03/31/95 10.0% 03/31/00 4,680 39 P.O. Box 718 Munford, TN 38058 Andre A. Winrow 2,153 89 29 1,312 08/31/94 8.3% 08/31/97 1,312 81 5669 Jardin Place Memphis, TN 38115 Nancy E. Bowman 13,000 444 159 10,587 09/30/94 8.8% 09/30/99 10,587 309 995 Hunters Retreat Collierville, TN 38017
38 KELLOGG COMPANY 36 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Danny L. Downing $20,000 $685 $335 $15,647 08/31/94 8.3% 08/31/99 $15,647 $753 12249 Highway 51 S Atoka, TN 38004 Gregory B. Jordan 9,000 878 269 7,043 08/31/94 8.3% 08/31/99 7,043 339 3623 Vanuy's Memphis, TN 38111 Carolyn A. Taylor 1,250 172 12 440 08/31/94 8.3% 08/31/96 440 24 1644 Castalia Street Memphis, TN 38114 Brian C. Miller 1,839 22 12 1,557 12/31/94 9.5% 12/31/98 1,557 99 137 Hillside Drive Potts Camp, MS 38659 Kevin M. Kelly 6,400 31 50 6,340 09/30/95 9.8% 09/30/99 6,340 464 10087 Curtiss Olive Branch, MS 38615 Jo A. Smith 17,000 1,357 464 12,612 08/31/94 8.3% 08/31/99 12,612 607 1500 Bonnie Drive Memphis, TN 38116
39 KELLOGG COMPANY 37 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST De Lois H. Jackocks $6,000 $297 $ 101 $4,633 08/31/94 8.3% 08/31/99 $4,633 $287 4555 Ridgewood Memphis, TN 38116 Erma R. Gipson 3,500 61 49 3,061 01/31/95 9.5% 01/31/00 3,061 218 3421 Cody Drive Memphis, TN 38115 Kenneth A. Woodard 4,500 377 31 1,826 08/31/94 8.3% 08/31/96 1,826 126 4417 Trout Valley Drive Memphis, TN 38141 Sandra F. Henderson 4,700 195 19 2,362 09/30/94 8.8% 09/30/96 2,362 17 3359 Foxgate Drive Memphis, TN 38115 R. Moore 14,000 551 234 10,953 08/31/94 8.3% 08/31/99 10,953 678 3670 Shady Hollow Lane Memphis, TN 38116 Adell H. Waller 5,000 764 282 3,319 08/31/94 8.3% 08/31/99 3,319 23 5051 Ridgewood Memphis, TN 38109
40 KELLOGG COMPANY 38 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Mon Blair, Jr. $10,000 $318 $208 $8,465 12/31/94 9.5% 12/31/99 $8,465 $469 230 Cochran, #6 Memphis, TN 38125 Van D. Ranklin, Jr. 4,239 - - 3,890 09/30/94 8.8% 09/30/99 3,890 256 1498 Livewell Memphis, TN 38114 Buford Harbin, Jr. 50,000 1,684 838 39,146 08/31/94 8.3% 08/31/99 39,146 1,884 1802 Marjorie Memphis, TN 38106 Julia F. Scarborough 11,000 1,246 514 8,134 10/31/94 8.8% 10/31/99 8,134 237 230 Cole Road Atoka, TN 38004 Billye C. Alsobrook 18,000 616 301 14,082 08/31/94 8.3% 08/31/99 14,082 872 3574 Hawkins Mill Road Memphis, TN 38128 Bennett G. Johnson 8,000 356 134 6,177 08/31/94 8.3% 08/31/99 6,177 298 1898 Shadowlawn Boulevard Memphis, TN 38106
41 KELLOGG COMPANY 39 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Michael E. McGee $2,167 $223 $24 $907 09/30/94 8.8% 09/30/96 $907 $46 3242 Sharpe Avenue Memphis, TN 38111 Roy D. Fowler 14,000 551 234 10,953 08/31/94 8.3% 08/31/99 10,953 527 5166 Marlboro Court Memphis, TN 38125 Keith C. McBride 2,000 179 29 1,608 05/31/95 10.0% 05/31/97 1,607 94 P.O. Box 1704 San Leandro, CA 94578 Ernestyne D. Toney 31,100 4,577 1,608 20,819 08/31/94 8.3% 08/31/99 20,819 143 4790 Hornsby Memphis, TN 38116 Truman L. May 11,000 101 69 9,382 10/31/94 8.8% 10/31/99 9,382 342 Route 3, Box 55 Coldwater, MS 38618 Isaac C. Mills 9,000 515 122 5,485 08/31/94 8.3% 08/31/97 5,485 302 Route 1, Box 198 Hickory Flat, MS 38633
42 KELLOGG COMPANY 40 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Mary L. Anderson $42,000 $1,283 $703 $33,227 08/31/94 8.3% 08/31/99 $33,227 $1,371 5295 Patrick Henry Drive Memphis, TN 38134 Roy F. Davis 50,000 1,322 766 48,678 04/30/96 9.3% 04/30/01 48,678 375 5730 Highway 195 Somerville, TN 38068 Diannna C. Broadway 1,000 304 10 175 03/31/95 10.0% 03/31/96 175 10 P.O. Box 1552 Cordova, TN 38088 James Lias 15,000 442 170 12,030 08/31/94 8.3% 08/31/99 12,030 827 320 Bristol Boulevard San Leandro, CA 94577 Manuel C. Holmes, Jr. 7,500 179 85 6,287 08/31/94 8.3% 08/31/99 6,287 389 27716 Calaroga Avenue Hayward, CA 94545 Ethel Heard 40,000 1,158 578 35,695 02/28/95 9.5% 02/28/00 35,695 1,978 2002 64th Avenue Oakland, CA 94621
43 KELLOGG COMPANY 41 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Patricia E. Daws $5,000 $168 $151 $4,515 03/31/95 10.0% 03/31/00 $4,515 $301 6195 Morgan Road Battle Creek, MI 49017 Donald R. Miller 35,000 1,016 429 28,655 09/30/94 8.8% 09/30/99 28,655 1,672 515 North Midway Road Tracy, CA 95376 Doris L. Seeley 15,000 1,331 821 13,277 07/31/95 10.0% 07/31/00 13,277 553 Box 123 2035 Sunset Drive Cedar Creek, NE 68106 Josephine Spencer 45,800 148 329 41,356 01/31/95 9.5% 01/31/00 41,356 3,275 181 Foote Road Battle Creek, MI 49017 Kim Ivan Bailey 4,500 1,061 25 99 12/31/94 9.5% 12/31/95 99 5 5502 Browne Street Omaha, NE 68104 Donnal D. David 20,000 2,419 845 13,913 08/31/94 8.3% 08/31/99 13,913 383 19150 Bennington Road Bennington, NE 68007
44 KELLOGG COMPANY 42 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Robert E. Heldt $6,000 $726 $254 $4,174 08/31/94 8.3% 08/31/99 $4,174 $115 12206 Gail Avenue Omaha, NE 68137 Al R. Heinen 6,000 841 388 4,397 12/31/94 9.5% 12/31/99 4,397 70 12005 William Plaza, Apt. 104 Omaha, NE 68144 Raymond L. Collins 30,000 3,628 1,268 20,870 08/31/94 8.3% 08/31/99 20,870 574 6843 North 64th Street Omaha, NE 68152 Richard D. Hassler 40,000 4,349 1,832 28,964 09/30/94 8.8% 09/30/99 28,964 211 Route 1 Vutan, NE 68073 Donald Wright 37,000 - 121 30,953 08/31/94 8.3% 08/31/99 30,953 1,277 8805 Q Street, 101A Omaha, NE 68127 Bettie G. Young 25,000 2,891 934 17,779 08/31/94 8.3% 08/31/99 17,779 611 P.O. Box 11976 Omaha, NE 68111
45 KELLOGG COMPANY 43 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Sarah E. Coleman $7,000 $311 $153 $5,405 08/31/94 8.3% 08/31/99 $5,405 $223 10515 Ellison Plaza, #8 Omaha, NE 68134 Geoffrey D. Heim 25,000 737 283 20,050 08/31/94 8.3% 08/31/99 20,050 1,103 33245 Alvarado Ave. Fremont, CA 94555 Dewey D. Martin 20,000 580 245 16,374 09/30/94 8.8% 09/30/99 16,374 836 45 Minerva Streete San Francisco, CA 94112 Jacob R. Samorano 27,000 795 306 21,654 08/31/94 8.3% 08/31/99 21,654 1,191 775 Lawn Court Tracy, CA 95376 Jeremiah Richards 5,000 135 77 4,536 03/31/95 10.0% 03/31/00 4,536 340 558 Walavista Avenue Oakland, CA 94610 William V. Hazelwood 42,500 624 243 34,713 08/31/94 8.3% 08/31/99 34,713 1,671 34839 Ozark River Way Fremont, CA 94555
46 KELLOGG COMPANY 44 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Paul R. Blackburn $12,000 $10,168 $337 $10,168 01/31/95 9.5% 01/31/00 $10,168 $ - 1433 Abbey Avenue San Leandro, CA 94579 Arturo M. Moreno 25,000 737 283 20,050 08/31/94 8.3% 08/31/99 20,050 1,379 26802 Lakewood Way Hayward, CA 94544 Mary C. Lopez 9,000 265 102 7,218 08/31/94 8.3% 08/31/99 7,218 497 5235 Amberwood Drive Freemont, CA 94555 A. Martinez 5,000 65 29 4,110 08/31/94 8.3% 08/31/99 4,110 283 3525 Allendale Avenue Oakland, CA 94619 Ben Salazar 24,500 701 311 20,770 11/31/94 8.8% 11/31/99 20,770 1,515 4338 Gregory Street Castro Valley, CA 94546 Jeannie L. Burns 28,000 825 317 22,456 08/31/94 8.3% 08/31/99 22,456 1,235 2345 High Street Oakland, CA 94601
47 KELLOGG COMPANY 45 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Eric H. Daffin $29,500 $869 $334 $23,659 08/31/94 8.3% 08/31/99 $23,659 $1,139 14744 Washington Avenue, #201 San Leandro, CA 94578 Janice Foy 21,222 625 241 17,020 08/31/94 8.3% 08/31/99 17,020 1,054 173 Ruby Lane Vallejo, CA 94590 Steven D. Knight 15,000 195 122 14,805 09/30/95 9.8% 09/30/00 14,805 842 1354 7th Street Rodeo, CA 94572 Jeanne McAfee 3,035 88 37 2,485 09/30/94 8.8% 09/30/99 2,485 163 2229 Church Street Oakland, CA 94605 Caroline D. Sanchez 5,000 169 63 4,239 11/30/94 8.8% 11/30/99 4,239 278 1055 Almond Blossom Drive Tracy, CA 95376 Sylvia J. Lyons 7,000 342 110 6,318 06/30/95 10.0% 06/30/98 6,318 369 888 David, #202 San Leandro, CA 94577 Paul V. Rushing 29,510 20,512 742 7,061 03/31/95 10.0% 03/31/00 7,061 412 385 Cornell Avenue Hayward, CA 94544
48 KELLOGG COMPANY 46 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Jimmy F. Peterson $5,000 $3,994 $178 $245 09/30/94 8.8% 09/30/99 $245 $9 9411 E Street Oakland, CA 94603 Rubin J. Ellis, Jr. 6,866 225 99 6,127 02/28/95 9.5% 02/28/00 6,127 340 7617 Halliday Avenue Oakland, CA 94605 Gilbert V. Sanchez 30,000 928 464 27,219 03/31/95 10.0% 03/31/00 27,219 681 1335 Via Madera San Lorenzo, CA 94580 Larry L. Himango 20,000 691 227 16,040 08/31/95 8.3% 08/31/99 16,040 1,103 6335 Leona Street San Leandro, CA 94605 Daniel J. Magalhaes 6,000 143 74 4,917 09/30/94 8.8% 09/30/99 4,917 251 16829 Los Reyes San Leandro, CA 94577 Annie R. Ralls 20,000 - 105 19,774 02/28/95 9.5% 02/28/00 19,774 1,409 9855 St. Elmo Drive Oakland, CA 94603 Rosary Mansfield 10,000 356 151 8,778 03/31/95 10.0% 03/31/99 8,778 512 4141 Deep Creek Road Apt. 164 Fremont, CA 94555
49 KELLOGG COMPANY 47 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Larry J. Faria $4,000 $311 $58 $3,231 05/31/95 10.0% 05/31/97 $3,231 $189 2965 Oakes Drive Hayward, CA 94542 Carlos M. Diaz 2,000 156 29 1,606 05/31/95 10.0% 05/31/97 1,606 54 14371 Pepperdine Street San Leandro, CA 94579 Kenny L. Marcantelli 8,000 236 91 6,416 08/31/94 8.3% 08/31/99 6,416 309 25172 Soto Road Hayward, CA 94544 Christen N. Griffin 15,000 402 235 13,813 04/30/95 10.0% 04/30/00 13,813 806 2439 107th Avenue Oakland, CA 94603 Rebecca Basco 3,700 102 54 3,302 02/28/95 9.5% 02/28/00 3,302 235 928 N. Airport Way Stockton, CA 95205 Gilberto R. Nunez 2,200 85 23 1,629 08/31/94 8.3% 08/31/98 1,629 112 122 Edward Court Tracy, CA 95376 Carol L. Stewart 10,000 295 113 8,020 08/31/94 8.3% 08/31/99 8,020 496 7527 Weld Street Oakland, CA 94601
50 KELLOGG COMPANY 48 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Karen D. Thomas $6,000 $207 $68 $4,812 08/31/94 8.3% 08/31/99 $4,812 $331 900 143rd Avenue, #42 San Leandro, CA 94577 Wilton S. Watson 20,000 589 227 16,040 08/31/94 8.3% 08/31/99 16,040 1,103 1390 E. 31st Street Oakland, CA 94610 Barbara A. Brown 10,000 185 125 8,436 10/31/94 8.8% 10/31/99 8,436 616 1314 89th Street Oakland, CA 94621 Thomas S. Cambra 12,000 354 136 9,624 08/31/94 8.3% 08/31/99 9,624 595 935 Martin Boulevard San Leandro, CA 94577 Barbara J. Gibson 7,913 210 126 7,394 05/31/95 10.0% 05/31/00 7,394 432 P.O. Box 5210 Oakland, CA 94605 Fazal A. Ahmadyar 10,000 377 118 7,812 10/31/94 8.8% 10/31/98 7,812 399 8507 Beverly Lane Dublin, CA 94598
51 KELLOGG COMPANY 49 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS - YEAR ENDED OCTOBER 31, 1996 (1) - --------------------------------------------------------------------------------
CURRENT VALUE AT TRANSACTION DATE ------------------------------------ COST OF NET NET NET SECURITIES REALIZED IDENTITY OF ISSUE PURCHASE PRICE SALES PRICE SOLD GAIN Morgan Bank GIC #41 9.370% 6/1/96 $ - $70,699,393 $70,699,393 $ - Metropolitan Life GIC 6.27% 6/1/99 22,514,441 Hancock John GAC 5919-1001 8.30% 6/1/97 36,552,406 36,552,406 New York Life GA 30321002 6.72% 6/1/00 47,848,759
(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, 1995. EX-99.02 10 EXHIBIT 99.02 1 KELLOGG COMPANY SALARIED SAVINGS AND INVESTMENT PLAN FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION OCTOBER 31, 1996 2 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, 1996 AND 1995 AND FOR THE YEARS THEN ENDED: Statement of assets available for benefits, with fund information 2-3 Statement of changes in assets available for benefits, with fund information 4-5 Notes to financial statements 6-10 ADDITIONAL INFORMATION: Item 27a - Schedule of assets held for investment purposes - October 31, 1996 11 Item 27b - Schedule of loans or fixed income obligations - October 31, 1996 12-16 Item 27d - Schedule of reportable transactions - year ended October 31, 1996 17
3 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, 1996 and 1995, and the changes in assets available for benefits for the years then ended, 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 11 - 17 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 11, 1997 4 KELLOGG COMPANY SALARIED 2 SAVINGS AND INVESTMENT PLAN STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION OCTOBER 31, 1996
FIXED COMPANY LOAN BOND INCOME EQUITY STOCK TOTAL FUND FUND FUND FUND FUND ----- ----- ---- ------ ------ ------- ASSETS: Receivables: Employer contributions $ 372,162 $ - $ 14,708 $ 120,899 $ 125,311 $ 111,244 Employee contributions 3,296 3,296 Interest 19,702 19,702 ------------ ---------- ---------- ------------ ----------- ----------- Total receivables 395,160 14,708 143,897 125,311 111,244 ------------ ---------- ---------- ------------ ----------- ----------- Investments: Plan's interest in Master Trust 130,008,126 9,333,237 84,379,931 36,294,958 Interfund borrowings (16,615) 16,615 Guaranteed investment contracts 262,368,944 262,368,944 Loans to participants 4,650,237 4,650,237 TBC Pooled Funds Daily Liquidity 5,386,548 5,386,548 ------------ ---------- ---------- ------------ ----------- ----------- Total investments 402,413,855 4,650,237 9,333,237 267,738,877 84,396,546 36,294,958 ------------ ---------- ---------- ------------ ----------- ----------- Assets available for benefits $402,809,015 $4,650,237 $9,347,945 $267,882,774 $84,521,857 $36,406,202 ============ ========== ========== ============ =========== ===========
See accompanying notes to financial statements 5 KELLOGG COMPANY SALARIED 3 SAVINGS AND INVESTMENT PLAN
STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION OCTOBER 31, 1995 - --------------------------------------------------------------------------------------------------------------- FIXED COMPANY LOAN BOND INCOME EQUITY STOCK TOTAL FUND FUND FUND FUND FUND ---- ---- ---- ------ ------ ----- ASSETS: Receivables: Employer contributions $ 390,747 $ - $ 14,036 $ 162,153 $ 85,646 $ 128,912 Employee contributions 742 742 Interest 329 329 ------------ ---------- ---------- ------------ ----------- ----------- Total receivables 391,818 14,036 163,224 85,646 128,912 ------------ ---------- ---------- ------------ ----------- ----------- Investments: Plan's interest in Master Trust 98,010,029 6,949,613 47,787,040 43,273,376 Interfund borrowings (1,056,536) 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 48,843,576 43,273,376 ------------ ---------- ---------- ------------ ----------- ----------- Assets available for benefits $392,347,106 $4,941,740 $6,963,653 $288,110,203 $48,929,222 $43,402,288 ============ ========== ========== ============ =========== ===========
See accompanying notes to financial statements 6 KELLOGG COMPANY SALARIED 4 SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION OCTOBER 31, 1996 - ---------------------------------------------------------------------------------------------------------------------- FIXED COMPANY LOAN BOND INCOME EQUITY STOCK TOTAL FUND FUND FUND FUND FUND ----- ---- ---- ------ ----- ------ Contributions: Employer $ 5,359,464 $ - $ 211,000 $ 1,927,927 $ 1,474,352 $ 1,746,185 Employee 12,956,687 611,442 5,179,614 4,261,610 2,904,021 Loans repaid (2,086,990) 66,617 899,071 585,481 535,821 Rollover from other qualified plans 392,994 45,796 33,086 205,038 109,074 ------------ ----------- ---------- ------------ ----------- ----------- Total contributions 18,709,145 (2,086,990) 934,855 8,039,698 6,526,481 5,295,101 ------------ ----------- ---------- ------------ ----------- ----------- Earnings on Investments: Plan's interest in income of Master Trust 10,509,961 421,398 1,261 14,388,278 (4,300,976) Interest income 19,313,397 422,481 18,890,916 Trustee fees (38,253) (737) (27,760) (4,888) (4,868) Administrative fees (252,891) (5,080) (183,020) (37,200) (27,591) ------------ ----------- ---------- ------------ ----------- ----------- Total earnings on investments, net 29,532,214 422,481 415,581 18,681,397 14,346,190 (4,333,435) ------------ ----------- ---------- ------------ ----------- ----------- Net transfers between funds 1,645,007 (16,245,305) 18,920,456 (4,320,158) Participant withdrawals (37,781,580) (312,680) (563,265) (29,844,720) (3,831,863) (3,229,052) Loans to participants 1,685,686 (47,886) (858,857) (369,807) (409,136) Net transfers between Plans 2,130 358 1,178 594 ------------ ----------- ---------- ------------ ----------- ----------- Net increase (decrease) 10,461,909 (291,503) 2,384,292 (20,227,429) 35,592,635 (6,996,086) Assets available for benefits at beginning of year 392,347,106 4,941,740 6,963,653 288,110,203 48,929,222 43,402,288 ------------ ----------- ---------- ------------ ----------- ----------- Assets available for benefits at end of year $402,809,015 $4,650,237 $9,347,945 $267,882,774 $84,521,857 $36,406,202 ============ =========== ========== ============ =========== ===========
See accompanying notes to financial statements 7 KELLOGG COMPANY SALARIED 5 SAVINGS AND INVESTMENT PLAN STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION OCTOBER 31, 1995 - ---------------------------------------------------------------------------------------------------------------------------- FIXED COMPANY LOAN BOND INCOME EQUITY STOCK TOTAL FUND FUND FUND FUND FUND ----- ---- ---- ------ ----- ------ Contributions: Employer $ 5,756,723 $ - $ 185,623 $ 2,661,762 $ 1,036,407 $ 1,872,931 Employee 12,875,500 511,775 6,221,383 2,931,395 3,210,947 Loans repaid (1,454,867) 49,013 704,899 261,588 439,367 Rollover from other qualified plans 215,449 22,100 46,348 99,941 47,060 ------------ ----------- ---------- ------------ ----------- ------------ Total contributions 18,847,672 (1,454,867) 768,511 9,634,392 4,329,331 5,570,305 ------------ ----------- ---------- ------------ ----------- ------------ Earnings on Investments: Plan's interest in income of Master Trust 21,150,938 844,826 264,568 9,450,049 10,591,495 Interest income 19,905,897 346,424 19,559,473 Trustee fees (35,227) (555) (26,319) (3,482) (4,871) Administrative fees (175,712) (2,459) (136,650) (16,188) (20,415) ------------ ----------- ---------- ------------ ----------- ------------ Total earnings on investments, net 40,845,896 346,424 841,812 19,661,072 9,430,379 10,566,209 ------------ ----------- ---------- ------------ ----------- ------------ Net transfers between funds 332,359 17,302,474 2,978,628 (20,613,461) Participant withdrawals (19,764,652) (351,982) (299,382) (16,415,743) (1,155,409) (1,542,136) Loans to participants 2,936,521 (58,452) (1,514,939) (573,357) (789,773) Net transfers between Plans 15,331 4,746 7,228 1,341 2,016 ------------ ----------- ---------- ------------ ----------- ------------ Net increase (decrease) 39,944,247 1,476,096 1,589,594 28,674,484 15,010,913 (6,806,840) Assets available for benefits at beginning of year 352,402,859 3,465,644 5,374,059 259,435,719 33,918,309 50,209,128 ------------ ----------- ---------- ------------ ----------- ------------ Assets available for benefits at end of year $392,347,106 $ 4,941,740 $6,963,653 $288,110,203 $48,929,222 $ 43,402,288 ============ =========== ========== ============ =========== ============
See accompanying notes to financial statements 8 KELLOGG COMPANY SALARIED 6 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, 1996 or 1995:
INTEREST OCTOBER 31, DESCRIPTION RATE 1996 1995 Putnam Horizon Managed Synthetic GIC Fund Variable $ 30,048,621 $28,395,496 Brundage Story & Rose Managed Synthetic GIC Fund Variable 30,184,431 28,480,679 Morgan Bank GIC #40 9.37% - 34,922,275 John Hancock GAC #5917-10001 8.82% 40,670,332 56,874,232 Protective Life Ins. GIC #807-A 6.08% 6,665,585 18,850,129 Allstate Life Ins. GAC #5686 8.13% 26,089,091 24,127,523 John Hancock GAC #7606 7.87% 25,310,440 23,463,837 New York Life GAC #30320002 6.72% 30,310,832 - Plan's interest in Master Trust Variable 130,008,126 98,010,029
ALLOCATION OF NET INVESTMENT INCOME TO PARTICIPANTS Net investment income related to the respective investment options 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. 2. PROVISIONS OF THE PLAN PLAN ADMINISTRATION The Plan is administered by the ERISA Administrative Committee appointed by Kellogg Company. 9 KELLOGG COMPANY SALARIED 7 SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------ 2. PROVISIONS OF THE PLAN (CONTINUED) 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 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 constant rate equal to one percent over the prime rate in the month the loan begins. Principal and interest are paid ratably through monthly payroll deductions. Loans that are considered to be uncollectible at year end result in the outstanding principal being considered a hardship withdrawal from the participant's plan account. 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. 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. 10 KELLOGG COMPANY SALARIED 8 SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------ 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 at October 31, 1996 and 1995 and the changes in assets for the periods then ended are as follows: 11 KELLOGG COMPANY SALARIED SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS 9 - ------------------------------------------------------------------------------- 4. MASTER TRUST (CONTINUED) KELLOGG COMPANY MASTER TRUST SCHEDULE OF ASSETS AND LIABILITIES FOR MASTER TRUST INVESTMENT ACCOUNTS
PENSION PLANS SAVINGS & INVESTMENT PLANS TOTAL 10/31/95 10/31/96 10/31/95 10/31/96 10/31/95 10/31/96 CASH/EQUIVALENTS: ------------------------------ --------------------------- --------------------------- Non-Interest Bearing $ 217,156 $ 1,316 $ 21,959 $ 431 $ 239,115 $ 1,747 Interest Bearing Cash $ 3,233,903 $ 2,771,776 $ 0 $ 0 $ 3,233,903 $ 2,771,776 ------------------------------ --------------------------- --------------------------- TOTAL CASH/EQUIVALENTS $ 3,451,059 $ 2,773,092 $ 21,959 $ 431 $ 3,473,018 $ 2,773,523 ------------------------------ --------------------------- --------------------------- RECEIVABLES $ 43,951,125 $ 60,900,475 $ 197,607 $ 274,793 $ 44,148,732 $ 61,175,268 ------------------------------ --------------------------- --------------------------- GENERAL INVESTMENTS: Long Term U.S. Gov't Securities $ 39,730,104 $ 50,267,438 $ 8,478,055 $ 7,389,825 $ 48,208,159 $ 57,657,263 Short Term U.S. Gov't Securitie $ 0 $ 0 $ 470,954 $ 402,416 $ 470,954 $ 402,416 Corporate Debt - Long Term $ 11,602,092 $ 14,301,477 $ 2,148,889 $ 7,648,217 $ 13,750,981 $ 21,949,694 Corporate Debt - Short Term $ 820,221 $ 0 $ 225,136 $ 25,139 $ 1,045,357 $ 25,139 Corporate Stocks - Preferred $ 1,250,342 $ 1,838,037 $ 0 $ 0 $ 1,250,342 $ 1,838,037 Corporate Stocks - Convertible $ 2,821,724 $ 5,419,318 $ 0 $ 0 $ 2,821,724 $ 5,419,318 Corporate Stocks - Common $ 419,250,631 $477,113,443 $209,608,570 $252,507,733 $628,859,201 $729,621,176 Real Estate Pooled Funds $ 19,350,020 $ 17,810,044 $ 0 $ 0 $ 19,350,020 $ 17,810,044 Value of Interest in Pooled Funds $ 2,025,248 $ 8,948,629 $ 445,059 $ 333,995 $ 2,470,307 $ 9,282,624 Guaranteed Investment Contracts $ 53,760,024 $ 68,035,400 $ 0 $ 0 $ 53,760,024 $ 68,035,400 ------------------------------ --------------------------- --------------------------- TOTAL INVESTMENTS $ 550,610,406 $643,733,786 $221,376,663 $268,307,325 $771,987,069 $912,041,111 ------------------------------ --------------------------- --------------------------- TOTAL ASSETS $ 598,012,590 $707,407,353 $221,596,229 $268,582,549 $819,608,819 $975,989,902 ------------------------------ --------------------------- --------------------------- PAYABLES ($41,486,770) ($62,117,871) $ 0 $ 0 ($41,486,770) ($62,117,871) ------------------------------ --------------------------- --------------------------- TOTAL LIABILITIES ($41,486,770) ($62,117,871) $ 0 $ 0 ($41,486,770) ($62,117,871) ------------------------------ --------------------------- --------------------------- NET ASSETS $ 556,525,820 $645,289,482 $221,596,229 $268,582,549 $778,122,049 $913,872,031 ============================== =========================== =========================== Percentage Interest held by the Plan 0.0% 0.0% 44.2% 48.4% 12.6% 14.2%
12 KELLOGG COMPANY SALARIED SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS 10 - -------------------------------------------------------------------------------- 4. MASTER TRUST (CONTINUED) KELLOGG COMPANY MASTER TRUST SCHEDULE OF INCOME AND EXPENSES, CHANGES IN NET ASSETS AND NET INCREASE (DECREASE) IN NET ASSETS OF MASTER TRUST INVESTMENT ACCOUNTS
PENSION PLANS SAVINGS & INVESTMENT PLANS TOTAL 10/31/95 10/31/96 10/31/95 10/31/96 10/31/95 10/31/96 ----------------------------- ---------------------------- --------------------------- Transfer of Assets Into Investment Account $ 39,000,063 $ 60,000,541 $270,373,840 $471,493,020 $309,373,903 $531,493,561 Earnings on Investments Interest $ 11,111,429 $ 7,804,578 $ 1,341,964 $ 1,153,223 $ 12,453,393 $ 8,957,801 Dividends $ 3,457,702 $ 2,789,517 $ 3,259,625 $ 2,829,397 $ 6,717,327 $ 5,618,914 Corporate Actions $ 6,150 $ 1,597,268 $ 0 $ 0 $ 6,150 $ 1,597,268 Pooled Fund Distributions $ 1,824,378 $ 4,177,043 $ 0 $ 0 $ 1,824,378 $ 4,177,043 Miscellaneous $ 661 $ 125 $ 0 $ 0 $ 661 $ 125 Net Realized Gain/(Loss) $ 7,153,214 $ 26,178,076 $ 9,849,022 $ 18,018,388 $ 17,002,236 $ 44,196,464 ----------------------------- ---------------------------- --------------------------- TOTAL ADDITIONS $ 62,553,597 $102,547,148 $284,824,451 $493,494,028 $347,378,048 $596,041,176 ----------------------------- ---------------------------- --------------------------- Transfer of Assets Out of Investment Account ($9,692,814) ($38,227,387) ($325,217,232) ($437,982,138) ($334,910,046) ($476,209,525) Fees and Commissions ($1,036,664) ($1,487,578) ($32,385) ($58,996) ($1,069,049) ($1,546,574) ----------------------------- ---------------------------- --------------------------- TOTAL DISTRIBUTIONS ($10,729,478) ($39,714,965) ($325,249,617) ($438,041,134) ($335,979,095) ($477,756,099) ----------------------------- ---------------------------- --------------------------- Change in Unrealized Appreciation $ 51,175,245 $ 25,931,479 $ 34,283,639 ($8,466,574) $ 85,458,884 $ 17,464,905 ----------------------------- ---------------------------- --------------------------- NET CHANGE IN ASSETS $102,999,364 $ 88,763,662 ($6,141,527) $ 46,986,320 $ 96,857,837 $135,749,982 Net Assets at Beginning of Year $453,526,456 $556,525,820 $227,737,756 $221,596,229 $681,264,212 $778,122,049 ----------------------------- ---------------------------- --------------------------- Net Assets at End of Year $556,525,820 $645,289,482 $221,596,229 $268,582,549 $778,122,049 $913,872,031 ============================= ============================ ===========================
13 KELLOGG COMPANY SALARIED 11 SAVINGS AND INVESTMENT PLAN ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES - OCTOBER 31, 1996 - -------------------------------------------------------------------------------
MARKET UNREALIZED SECURITY DESCRIPTION COST PRICE VALUE GAIN/LOSS TBC, Inc. Pooled Employee Funds Daily Liquidity Fund $ 5,386,548 1.00 $ 5,386,548 $ - Loans to participants 4,650,237 1.00 4,650,237 Brundage Story & Rose Managed Synthetic GIC Fund Variable Rate 30,184,431 1.00 30,184,431 John Hancock GAC #5917-10001 8.82% 6/1/97 40,670,332 1.00 40,670,332 Protective Life Ins. GIC #807-A 6.08% 1/31/97 6,665,585 1.00 6,665,585 Provident Life GAC #627-05437-01A 6.24% 6/30/97 14,949,623 1.00 14,949,623 Principal Mutual GAC #4-11730-01 5.30% 12/1/98 8,703,007 1.00 8,703,007 Putnam Horizon Managed Synthetic GIC Variable Rate 6/1/99 30,048,621 1.00 30,048,621 Peoples Security Ins Co #BDA00379FR 5.15% 12/1/97 9,059,903 1.00 9,059,903 Allstate Life Insurance GAC #5686 8.13% 12/1/98 26,089,091 1.00 26,089,091 Commonwealth Life #ADA00668FR 7.64% 6/1/98 16,586,859 1.00 16,586,859 John Hancock GAC #7606 7.87% 12/1/98 25,310,440 1.00 25,310,440 Commonwealth Life GIC 6.19% 6/1/98 7,121,328 1.00 7,121,328 Metropolitan Life GIC 6.27% 6/1/99 11,226,304 1.00 11,226,304 New York Life GIC 6.20% 6/1/98 5,442,588 1.00 5,442,588 New York Life #GA3032002 6.72% 6/1/00 30,310,832 1.00 30,310,832 ------------ ------------ ---------- $272,405,729 $272,405,729 $ - ============ ============ ==========
14 KELLOGG COMPANY SALARIED 12 SAVINGS AND INVESTMENT PLAN ITEM 27b - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - -------------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Christine M. Chalovich $ 7,500 $1,208 $218 $4,202 10/31/94 8.8% 10/31/97 $ 4,202 $ 123 608 Rockcrossing Lane Allen, TX 75002 Michael Lastra 7,000 203 86 5,628 09/30/94 8.8% 09/30/99 5,628 82 1440 Greenfield Circle Pinole, CA 94564 Paul M. Cannella 50,000 1,305 807 48,695 12/31/95 9.8% 12/31/00 48,695 1,978 67 Paumanake Avenue Babylon, NY 11702 Michael A. Cramer 7,000 523 191 5,193 08/31/94 8.3% 08/31/99 5,193 250 499 Nixon Road Cheswick, PA 15024 Wendy Baum 2,000 1,027 17 182 09/30/94 8.8% 09/30/96 182 11 9946 Aloma Bend Lane Ovedo, FL 32765 Thomas A. Lawrence 10,500 309 119 8,265 08/31/94 8.3% 08/31/99 8,265 568 1322 Scott Road Papillion, NE 68046
15 KELLOGG COMPANY SALARIED 13 SAVINGS AND INVESTMENT PLAN ITEM 27b - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ----------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Robyn R. Daly $ 1,800 $245 $ 39 $ 956 08/31/94 8.3% 08/31/97 $ 956 $ 40 2582 Marcia Drive Lawrenceville, GA 30244 Anita J. Lewis 3,000 172 51 2,172 09/30/94 8.8% 09/30/98 2,172 143 840 117th Terrace North, Apt. 6 St. Petersburg, FL 33716 Rhonda J. Haynes 3,647 - - 3,647 07/31/96 9.3% 07/31/01 3,647 - 515 Stonegate Circle Schaumburg, IL 60193 Frank S. Gant 2,000 284 103 1,349 08/31/94 8.3% 08/31/99 1,349 182 16094 Harden Circle Southfield, MI 48075 Gregory A. Chapman 10,000 295 113 8,020 08/31/94 8.3% 08/31/99 8,020 496 2161 E. Gore Road Erie, PA 16510 Archie L. Moore 5,000 217 92 4,020 10/31/94 8.8% 10/31/99 4,020 235 3342 Desertwood Lane San Jose, CA 95132
16 KELLOGG COMPANY SALARIED 14 SAVINGS AND INVESTMENT PLAN ITEM 27b - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Randall K. Abrahmas $10,000 $290 $123 $8,041 09/30/94 8.8% 09/30/99 $8,041 $587 3174 62nd Street Saugatauck, MI 49453 Erick V. Lashley 6,000 837 438 4,767 4/30/95 10.0% 04/30/00 4,767 - Marriott Residence Inn 1901 201 East Walton Chicago, IL 60611 Debra E. Lendino 6,000 177 141 5,508 05/31/95 10.0% 05/31/00 5,508 321 5435 N. Dakia Chicago, IL 60641 Charlene J. Cribbs 20,130 - - 17,322 08/31/94 8.3% 08/31/99 17,322 1,310 49 Rose Street Battle Creek, MI 49017 David M. Boles 50,000 - - 44,460 08/31/94 8.3% 08/31/99 44,460 3,057 14672 Bower Road Bellevue, MI 49021 Kathey A. Stayner 3,950 239 31 1,986 09/30/94 8.8% 09/30/96 1,986 145 7074 S. 34th Street Scotts, MI 49088
17 KELLOGG COMPANY SALARIED 15 SAVINGS AND INVESTMENT PLAN ITEM 27b - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - -----------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Dale Taplin $32,000 $ 545 463 $28,892 02/28/95 9.5% 02/28/00 $28,892 $2,059 6019 Cypress Portage, MI 49002 David H. King 10,915 - - 9,720 09/30/94 8.8% 09/30/99 9,720 142 260 N. Wood Street Battle Creek, MI 49017 Donald E. Oliver 15,000 1,814 634 10,435 08/31/94 8.3% 08/31/99 10,435 215 9507 2 1/2 Mile Road East Leroy, MI 49051 Herbert L. Payne 50,000 1,341 784 45,366 04/30/95 10.0% 04/30/00 45,366 3,478 4996 Whitworth Memphis, TN 38116 Gloston Anderson, Jr. 20,000 589 227 15,743 08/31/94 8.3% 08/31/99 15,743 1,083 439 Dreger Avenue Memphis, TN 38109 Gary H. Bishop 12,500 368 142 9,839 08/31/94 8.3% 08/31/99 9,839 271 4874 Harvest Knoll Avenue Germantown, TN 38125
18 KELLOGG COMPANY SALARIED 16 SAVINGS AND INVESTMENT PLAN ITEM 27b - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996 - ---------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- ------------------- OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST Jean A. Cisler $ 1,200 $ 99 10 $ 576 10/31/94 8.8% 10/31/96 $ 576 $ 33 6711 S. 49th Avenue Omaha, NE 68117 Ronald C. Clark 10,000 1,640 465 6,174 09/30//94 8.8% 09/30/98 6,174 45 5190 S.W. Greenwood Tualatin, OR 97062 Lynn Beeson 2,300 36 38 2,235 07/31/95 10.0% 07/31/00 2,235 205 180 San Tomas Aquino Road #19 Campbell, CA 95008 Cheryl H. Washington 2,040 56 29 1,792 02/28/95 9.5% 02/28/00 1,792 28 7617 Halliday Avenue Oakland, CA 94605 Barry A. Yerman 10,000 398 239 9,209 06/30/95 10.0% 06/30/00 9,209 307 6849 Penguin Street Ventura, CA 93003 Anne E. Jones-Schlagel 3,600 61 52 3,200 02/28/95 9.5% 02/28/00 3,200 228 461 Pismo Court Livermore, CA 94550
19 KELLOGG COMPANY SALARIED 17 SAVINGS AND INVESTMENT PLAN ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS - YEAR ENDED OCTOBER 31, 1996 (1) - -------------------------------------------------------------------------------
CURRENT VALUE AT TRANSACTION DATE ------------------------------------ COST OF NET NET NET SECURITIES REALIZED IDENTITY OF ISSUE PURCHASE PRICE SALES PRICE SOLD GAIN New York Life GA 3032002 6.720% 6/1/00 $35,583,846 $ - $ - $ - Morgan Bank GIC #40 9.370% 6/1/96 31,251,206 31,251,206 John Hancock GAC #5917-0001 8.30% 6/1/95 20,832,312 20,832,312
(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, 1995. -----END PRIVACY-ENHANCED MESSAGE-----