From: Jim Markey [Jim.Markey@kellogg.com] Sent: Friday, May 17, 2002 5:02 PM To: rule-comments@sec.gov Subject: Comments on File Nos. S7-08-02 and S7-09-02 May 17, 2002 Mr. Jonathan G. Katz Secretary Securities and Exchange Commission Via rule-comments@sec.gov Re: File Nos. S7-08-02 (Proposed Rule for Acceleration of Periodic Report Filing Dates and Disclosure of Website Access) and S7-09-02 (Proposed Rule for Disclosure of Certain Management Transactions on Form 8-K) Dear Mr. Katz: On behalf of Kellogg Company, which has a public float of more than $75 million, I wish to express my concern about certain aspects of these proposed rules, which would accelerate the time for filing our periodic reports and which would require management transactions to be promptly reported on Forms 8-K, as well as on SEC Forms 4 and 5. With regard to the first rule, I believe that the 30-day acceleration of the filing date for the Form 10-K will result in extra costs for Kellogg Company and other companies with a public float of more than $75 million. I would also expect the acceleration of the filing date for the Forms 10-K and 10-Q would result in more errors in filed documents. Let me explain why: Currently, Kellogg Company prints its annual report to stockholders on a web-press during the first week of March, with that document and the proxy materials being sent to our stockholders in mid-to-late March in time for a late April annual meeting. Until that document is finalized, we intensely review the report, in its web-press format, for errors. When that is finalized, we then export the data file to our financial printer, who translates significant portions of it for filing with the SEC as part of our Form 10-K using the EDGAR system. Handling the process in this way allows us to make changes to only one data file at a time. The 30-day acceleration, however, would require us to establish two data files at some point in mid-February, and to ensure that the same changes are made to both files, which will raise the cost of printing the Form 10-K. This increase in complexity also raises the chances that errors will be made. We cannot simply export the data into the EDGARized version without review because the data in tables, as well as some other data, is usually re-input by the financial printer, rather than directly translated. In addition, most of the people involved in the closing of our books and the preparation of the annual report and audited financial statements are also involved in the preparation and review of the Form 10-K. Accelerating the filing date for the Form 10-K by 30 days could also lead to errors by further stressing those people. Many of these same people, by the way, are also involved in closing our books on a quarterly basis and in preparing our quarterly earnings releases and Forms 10-Q; I have the same concern about accelerating the Form 10-Q filing deadline. I also wonder whether the acceleration will generally be regarded as significantly increasing the quality and availability of financial information. Kellogg Company, like many companies, already provides (usually within thirty days of quarter-end) a consolidated statement of earnings, including operating segment data, as well as a consolidated balance sheet and statement of cash flow as part of its quarterly earnings releases. Additionally, we conduct a public investors' and analysts' teleconference, and post supplemental financial data, on our website. Much of the financial statement information that would be included in the Forms 10-Q--apart from the more detailed Management's Discussion and Analysis and footnote information, which take more time to prepare and review--is therefore already available to investors within the 30 and 60-day periods, when we publicly release our earnings. Investors might well be better off having companies provide consolidated financial statements, and other selected financial data chosen by the SEC, when companies release earnings, rather than forcing companies--because of work-load and quality concerns--to choose between providing this information or preparing Forms 10-Q. With regard to the second rule, it will be a duplication of effort to require Kellogg Company to report the same transactions on SEC Forms 8-K that our executive officers and directors report on SEC Forms 4 and 5. It also will increase our costs. Right now, we file Forms 4 and 5 for our executive officers and directors in hard copy, but file Forms 8-K using EDGAR. Up to now, we have used a financial printer to make any EDGAR filings for us, because the number of annual periodic reports was relatively small. However, with these new requirements, we could easily be required to file 20 or more Forms 8-K annually and our financial printer charges approximately $500 for each EDGAR filing, no matter how small. So our overall costs would increase significantly. I would strongly suggest that the SEC simply accelerate the time to file the applicable Forms 4 and 5 instead of requiring the additional filing on Forms 8-K. The two-business day filing requirement for some transactions would also require Kellogg Company, like other companies with at least $75 million of public float, to hire an additional person, or to train several back-ups. Like most U.S. companies, Kellogg Company has a very lean legal staff, with each of our lawyers having responsibility for several areas. Under the new rules, Kellogg Company will always need to have someone else available to prepare and file Forms 8-K quickly, which will increase our costs, because there's no deadline extension if the dedicated lawyer is ill, or is handling an acquisition, litigation or other business far away from the office. Sincerely, /s/ James Markey James Markey Vice President and Chief Counsel--Securities and International Kellogg Company